PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
On 6 April 2011, many trusts will cease to be as attractive a vehicle in which to hold assets as they were when they were originally set up and so now is a good time to review any trusts with the proposed changes in mind.
In particular, the position regarding undistributed income in the trust should be given some thought – if there is too much retained income, a tax charge may arise under Section 496 of the Income Tax Act 2007. On the other hand, if the ‘tax pool’ is sufficiently large, delaying a distribution until after the start of the 2010/2011 tax year may be beneficial, although this will depend on the personal tax situation of the beneficiary.
Another planning point is to consider creating a revocable interest in possession for beneficiaries to be put in place before the end of this tax year.