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Muslims may have to sell homes to pay IHT

Muslim families could be forced to sell their homes to pay inheritance tax bills following Chancellor Gordon Brown’s surprise overhaul of the taxation of trusts in the Budget.

The Society of Trust and Estate Practitioners head of policy and communications Keith Johnston says there is a danger that thousands of Muslim families will be affected and will be faced with no option but to sell their homes as spousal exemption are being removed from trusts.

Under Sharia law, a Muslim must distribute wealth among certain members of the family. An eighth of assets go to a widow, a quarter to a widower and the rest is shared among other family members.

Clarkson Wright & Jakes solicitor (wills and administra tion of estates) Mehnaz Siddiqui says trusts have been traditionally used by Muslims as a way of redistributing assets without incurring an IHT charge.

Siddiqui says: “We are saying to our Muslim clients that if they have made a will designed to save tax, they should go back and see a solicitor. The impact of the rule changes have shown that the Treasury has acted without taking it upon itself to research the overall issues.”

A Treasury spokesman says: “The Government has provided for the position where a trust set up on death allows a widow to live in the family home as a life tenant, with the asset passing to other family members on the widow’s death. This arrangement is exempt from IHT rules. We are exploring how to ensure that trusts set up in accordance with Sharia law can benefit from this exemption.”

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