Will I need to change my will?

You will certainly need to review your will if you have left any assets in trust. This includes any trust set up for your surviving spouse because the assets may no longer be exempt from inheritance tax on your death even if they pass to your spouse

I am the beneficiary of an existing trust and the assets are to pass to my spouse on death. Will the assets still be exempt from inheritance tax?

If you die after 2008 the assets will no longer qualify for the spouse exemption

I set up a trust for my grandchildren/children some time ago. How are they affected by the proposals?

Beneficiaries of these sorts of trusts (often used for school fees) will need to take both income and capital no later than 18 to avoid an inheritance tax charge after this. If they are already entitled to income nothing needs to be done

What is the rate of inheritance tax payable?

If you set up a trust now, in your lifetime the rate of tax will be 20 per cent on the value of the gifted property. However, if you have not made earlier transfers the first £275,000 is tax-free. Thereafter the trust will be taxed at a maximum of 6 per cent every ten years — and on capital distributions — although it is likely this rate will rise

Can I make gifts to people outright?

Yes. As long as no trust is involved and you survive seven years there is no inheritance tax payable. You should not add to trusts or make new trusts. Almost all such transfers could suffer inheritance tax

Why are trusts being penalised?

The Government appears to dislike assets being held in trust, even one set up in a will. Hence the requirement that the children must take the money at 18

Can I now do anything to my existing trusts?

The Government is offering a transitional period until 2008 during which trusts can be varied. However, minor children will generally need to cash in at 18 to avoid inheritance tax penalties and existing trusts may need to be ended. Capital gains tax may well be triggered if you close existing trusts, so take advice

• Emma Chamberlain, a barrister, is a member of Technical Group of the Society of Trust and Estate Practitioners, and Chairman of Capital Taxes Committee, Chartered Institute of Taxation