THE full scale of Gordon Brown's tax raid on families which set aside money in trust for their children is revealed today.
Where there's a will: Gordon Brown has been accused of introducing a stealth tax via the BudgetThe Chancellor's move means that up to 10million people - ten times the initial estimate - will have to review their wills, at an astonishing cost of £2.5bn, figures suggest.
Those affected include parents that want to provide for the future of mentally handicapped children or protect their offspring from the consequences of divorce.
Grandparents who use trusts to leave sums to their grandchildren will also suffer.
Millions more will have to pay experts to check their life assurance policies to see how those with a trust element would be affected. One insurance firm estimates that more than 4million policies are in doubt. Critics say the move is the latest 'stealth tax' from the Chancellor.
The revelation of how many will be hit drives a coach and horses through the Treasury's claim that only a few hundred wealthy people will be affected by technical changes slipped out in the Budget.
Mr Brown wants to levy a 20% charge on the value of assets put into a trust above the £285,000 inheritance tax threshold, followed by a ' periodic' 6% charge every ten years, plus a further 6% on money taken out of trusts.
He will also force parents to allow their children to get hold of inheritance money in trusts when they are 18, not 25 as now, forcing millions of parents to rewrite their wills to take account of the change.
Figures produced by the Law Society show that up to two-thirds of those who have made a will are likely to be affected if:
• Their estate is worth more than £285,000.
• They have a trust written into their wills, a common device used for example to protect vulnerable members of the family, spouses with no income, or children after a divorce.
• Or if they have children under 25.
Stephen Pallister, a tax partner with solicitors Charles Russell and the Law Society's spokesman on trusts, said between a third and two-thirds of the 15million wills in the country are affected. At an average cost of £250 for a solicitor to review or rewrite a will, this means the bill to individuals could hit £2.5bn - in stark contrast to the £15m Mr Brown says the measure will raise in tax.
Opposition MPs last night challenged the Treasury to publish its confidential assessment of the likely impact of the measures. The change to the enforcement of inheritance tax was contained in the Budget, but was not mentioned in Mr Brown's speech.
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The Treasury claimed the move applied to a relatively small number of sophisticated trusts used to protect estates and assets for future generations - known as Accumulation and Maintenance Trusts and Interest in Possession Trusts.
But specialists pointed out it would also affect vast numbers of wills, life assurance policies, and trusts used by grandparents to pay school fees of their grandchildren.
And they seized on the Treasury's admission that the measure was retrospective - it will apply to all existing trusts, wills and life assurance-policies. Last night Shadow Chancellor George Osborne said: 'This is a wake-up call to Middle Britain and a reminder of the consequences of having a Chancellor who is proud to call himself a socialist.
'It's done out of political spite. This is aimed at taxpayers who have saved and built up assets and want to leave them to their children in a responsible way. They don't want to avoid tax, this is ordinary tax payers.'
Mr Osborne backed the Law Society's call for the Treasury to publish its confidential assessment of how many people fall under the changes.
The Treasury denied withholding information on the numbers affected and said there had been no impact assessment. Paymaster General Dawn Primarolo said the measure was to stop the use of inheritance tax avoidance by certain types of trust.
• Are you a solicitor or financial adviser whose clients have been affected by the changes? Has your will been hit? Contact us with a brief outline of your story at trusts@dailymail.co.uk. If possible, include your mobile phone number.
Or write to: Trusts, c/o News Desk, Daily Mail, Northcliffe House, 2 Derry Street, London W8 5TT.
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