TAXPAYERS with homes that are worth more than £275,000 should review their wills in the wake of the rewrite of trust law buried in last week’s Budget, the Law Society said last night.

In a strongly worded critique, the Law Society of England and Wales attacked Gordon Brown’s decision to impose tough inheritance tax restrictions on a range of financial arrangements and called for the measures to be postponed.

The solicitors’ association said that the new rules would have a wide-ranging effect on ordinary homeowners, divorcées and others using trusts.

The new rules, which were announced in an obscure additional document, Budget Note 25, published with the Budget last week, impose inheritance taxes on assets held in certain trusts, known as accumulation and maintenance trusts and interest-in-possession trusts, which have previously been exempt from inheritance tax.

Dawn Primarolo, the Paymaster-General, wrote to The Times last week to insist that the law, which came into effect immediately after the Budget last week, would affect “only a tiny fraction of the wealthiest top 1 per cent of the population”. The Government’s aim is to crack down on tax avoidance.

But tax professionals insist that the new laws have a far wider impact than the Government claims. They say that the trusts it attacks are used for a range of innocuous purposes by ordinary taxpayers.

The Law Society said last night: “Taxpayers with assets in excess of the Nil Rate Band will have to review their wills and in many cases change them to probably a less flexible structure.”

It said that elderly people, and those who are mentally ill, might not be able to change their wills in time before they die, and thus “may be prejudiced”.

Also affected will be all divorced wives and children who have existing court orders establishing trusts in their favour, as well as anyone who has recovered damages that have been placed in trust.

It said: “The changes proposed are far reaching and will have significant impact on existing trusts . . . It is considered that the start date of the legislation should be postponed and safe harbours consulted upon.”

The new rules have caused consternation among tax professionals. David Rothenberg, of the accountants Blick Rothenberg, called the rules “the Chancellor’s unheralded attack on the dying”. He said that newly widowed women would face an unexpected inheritance tax bill if their husbands had placed their homes in a trust.

Christopher McCall, QC, of Maitland Chambers, said that it was not clear that the Government fully understood what it was proposing. He said: “No person in hospital who doesn’t have long to live is going to be able to get any advice from their solicitor over what to do for their surviving spouse.”

ASSETS THREAT