It was Benjamin Franklin who said that nothing is certain in life except death and taxes.

And despite Gordon Brown’s promise of tax cuts, there are more and more people falling into the Inheritance Tax (IHT) net.

The situation is exacerbated by people failing to do their homework on this aspect of their finances, not realising that the family home can be at risk when either of the persons in a couple go into a long-term care home.

Since 2006 when there were widespread changes to IHT rules, trusts and so on, many people have decided that trusts, as a vehicle, are not as useful as they were in the past.

Many companies, in addition, dropped their trust products because they were concerned about the consequences of people using them.

But the most significant thing to ascertain from all the changes that have been made, is that people nowadays must get hold of solutions that are “tailor made”, rather than just acquiring something “off the shelf”.

Reverting to the subject of trusts, a reminder first about what exactly a trust is. Simply, it is a mechanism for holding assets for the future or immediate benefit of others. There are four main types:

• Bare

• Interest in Possession

• Discretionary

• Discounted Gift Trusts

In the past, the most popular trust was the Interest in Possession trust. This was because assets placed into this type of trust were treated as potentially exempt transfers for IHT purposes.

However, as part of the 2006 changes, this type of trust is now treated in the same way as a discretionary trust and so it is this type of trust that is increasingly being used.

And as space prevents me from dealing with all the types of trust in detail, I will stick to a consideration of the discretionary type.

The main change was that putting assets into a trust made them chargeable to Inheritance Tax at the outset.

This being a chargeable lifetime transfer currently charged at 20% or half the lifetime rate.

For discretionary trusts there is a periodic tax of about 6% of the assets every 10 years and an exit charge when assets are paid out to any beneficiary.

This can be avoided by keeping the amount of assets transferred below the then nil rate band and, providing the donor survives seven years, then those assets will be free from inheritance tax.

Another aspect of death planning, is to consider any long-term care needs.

You may fear that if you go into a home the local authority will force you to sell the family home to pay for the cost.

However, by judicious use of a discretionary trust this can be avoided. The rules broadly state that if a property is jointly owned by a trust for your children, the council cannot make a claim against it.

They may place a charge against it so that on death they can get hold of some of the proceeds, but they can only claim half.

And if the family will not sell at time of death and the council is still pursuing their claim, their own guidelines state that the value of a half share of a property is effectively nil.

The point I am making is that if you wish to protect your assets and prevent them being used up for either long-term care costs or IHT on your death, then recent changes and the possibility of future changes to the rules mean you need to start your planning much earlier.

You should moreover be working with an advisor who knows how to tailor trusts to your individual needs.

Nicholas Watts is an independent financial adviser with Positive Solutions Financial Services which is regulated by the Financial Services Authority. To contact him, use the website www.realwealthmanagers.co.uk.