FAMILIES will be forced to spend a total of £340m to rewrite their wills following Gordon Brown’s budget crackdown on trusts, even though the government says it will raise only £15m a year from the measure.

Lawyers warned last week that more than 1m people will have to adapt their wills, at an average cost of £342 each, although the bill could rise to £1,000 for the most complicated arrangements.

The Society of Trust and Estate Practitioners said: “These new figures show how ridiculous the whole thing is. The amount that the government will raise is far outweighed by the cost to families.”

The chancellor used his budget to sneak in swingeing tax penalties on two types of trusts: interest in possession, and accumulation and maintenance. These are commonly used to pass wealth down the generations free from inheritance tax (IHT), while retaining some control over the money.

These types of trusts are often set up by a will when a person dies, so the changes are forcing hundreds of thousands of people to review their arrangements.

The crackdown also hit insurance schemes that claim to help families escape IHT, so the plans were hurriedly pulled from sale.

However, insurers are now relaunching their plans as the dust settles on Brown’s budget measures.

Last week Towry Law, a financial adviser, said its scheme, which uses an interest-in-possession trust, is open for new business. After studying the small print of the new rules, it found that many investors would still avoid a tax charge.

Clive Scott-Hopkins at Towry Law said: “You’ll only face the tax if you pay very large sums into our loan trust, or if you achieve exceptional returns on your investment.”

Under the new rules, there will be an IHT charge of 20% on gifts into these trusts, but only if they are over the nil-rate band of £285,000. There is a further 6% penalty every 10 years, but again only on everything over the nil-rate band.

Standard Life has also reopened two of its IHT plans, which it claims have emerged unscathed. Its loan and gift plans escape by using bare trusts, which are unaffected by the new rules.

They have disadvantages, though, as they are the least flexible type of trust. With interest-in-possession trusts the beneficiaries can be changed. With bare trusts they cannot. But Standard Life believes the tax benefits will outweigh the negatives for many people.

Prudential, Norwich Union and Clerical Medical have not opened for business again, but said they were reviewing their stance.

Gift trusts are designed for people who do not need access to their capital, and want to pass it to their heirs free from IHT, but also want to draw a regular income.

You make a gift into a single-premium insurance bond for your children, fixing how much income you draw until your death. If you survive for seven years, the bond does not count as part of your estate. Your heirs keep any growth in the bond as well as what remains of your investment.

Even if you die within seven years, your heirs may get a discount on the IHT because your right to draw an income from the gift reduces its value. The extent of the reduction depends on your age, health, gender and level of income.

Loan trusts allow you to retain the right to draw on your original capital as well as the income but the tax advantages are not as generous.

Advisers recommend that you take advice before taking out an insurance scheme because there may be more simple IHT planning measures that you should take beforehand.

And if you have a will that is written to set up a trust when you die, you should also take advice on whether it is hit by the crackdown.

If it is an accumulation and maintenance trust, you will have to change the rules. Until the budget, the trustees could retain control of the income until the children reached 25 and the capital for 80 years.

Since then, however, these trusts will have to be rewritten so the assets pass absolutely to the beneficiary at 18, or the trust could face a 6% tax charge every 10 years on the value of assets above the IHT threshold.

Interest-in-possession trusts are often set up to provide your spouse with an income, but pass capital to your children. You will now have to give your spouse more control over the trust to escape the rules. There is no need to rush, because your will can be altered up to two years after your death.

For more on tax visit www.timesonline.co.uk/tax