Lawyers and accountants are telling investors to hold fire on estate planning amid fears that millions of people will be caught by new government rules altering the tax treatment of some trusts.

Professional bodies, claiming that millions of Britons who hold assets in trust will be hit by the changes to inheritance tax rules, were poring over the details of the finance bill as FT Money went to press on Friday.

The chancellor’s surprise decision to levy tax on commonly used trusts prompted emergency meetings between professional bodies and the government earlier this week in an attempt to prevent the rules being brought in. But it appeared yesterday that little in the legislation had been changed and that the rules would simply flesh out the proposals.

In the Budget on March 22, the chancellor announced new tax charges aimed at accumulation and maintenance (A&M) trusts, widely used for school fees planning, and “interest in possession” (IIP) trusts, used to pass wealth between the generations. But many lawyers believe the ramifications go far wider than these two trusts.

The new rules levy a 6 per cent charge every 10 years from 2008 on many trusts that lawyers say are widely used by families to manage affairs after death or divorce. There will also be a 20 per cent tax charge to pay on any assets above £285,000 (the current nil rate band for inheritance tax purposes) and a further 6 per cent charge when they are taken out.

One issue that the government does seem to have taken on board in the finance bill is that trusts that are set up automatically when people die intestate (when they have not made a will) would not fall foul of the rules. It had been thought that, under the new rules, if someone died leaving a house in their own name worth £500,000, then their family would have an extra tax bill of £36,000, compared with nil before Budget day.

The Treasury said, as FT Money went to press: “We’ve no intention of catching these people with the rules and the finance bill will set out this intention.”

But the industry is still hoping there will be further amendments to the bill. Yet unless the government backtracks entirely the industry is predicting that almost a million clients would need to have their wills re-written in the light of the changes.

Advisers say the new rules will completely change the way people make provisions for wealth and estate planning and are advising people to wait until the finance bill has been examined properly before doing any financial planning.

John Riches, chairman of the Society of Trust and Estate Practitioners, says people will have some tough decisions to make following the change in rules. “The inability to make new lifetime trusts for children and grandchildren without a 20 per cent charge on the value in excess of the [inheritance tax] nil rate band, means that families will be forced to make outright gifts at a point where the receipt of wealth could deflect children and young adults from their studies, or to make no gifts at all,” he said.

Anyone who set up a trust that is affected before the Budget has until April 6, 2008 to unravel their arrangements. Trusts set up after the Budget have no period of grace. One other way to avoid the charges on A&M trusts is to give the assets to the children at 18 rather than 25, but of course, this is one of the things the trust was designed to avoid.

However, it is likely to be difficult to change trust arrangements. The trusts are run by trustees, not the person who set it up, so it will be the responsibility of the trustees to decide whether it should be changed, and they may have to go to court to do this. Trusts are frequently incorporated into wills so advisers are suggesting people hang on before sorting out wills unless people are on their death bed.

The Law Society recommends that anyone who has more than the new IHT threshold of £285,000 in assets, including the value of their own home, should revisit their will.

The finance bill, published yesterday, contains the final details of how this new tax regime will apply. Once the industry has had a look at the detail, it should have a better idea of how to advise people.