TAX PLANNING USING DEEDS OF VARIATION


by Andrew Robinson Director, STS (Europe)


Deeds of Variation allow for tax planning opportunities by effectively rewriting the will for inheritance tax (IHT) purposes.


A statement applying s.142 IHTA 1984, allows beneficiaries of a will to transfer assets received to another individual without IHT consequences.


There is no transfer of value by the person making the variation and IHT is computed on the basis that the will has been rewritten. This means that the tax planning window does not necessarily close at the date of the taxpayer’s death.


The deed must be made within two years of death, it must be in writing and signed by the person, or persons, making the variation. If appropriate elections are to be made, they must be contained within the deed.


Variations can be made in respect of property passing under the law


of intestacy. A variation can also be used to sever a joint tenancy so that the property can be passed under the will.


A Deed of Variation cannot be made in return for consideration in money or money’s worth. If consideration is involved, no election is allowed under s.142. “Consideration” does not include the making of another variation to which s.142 applies. This allows beneficiaries to “swap” assets acquired under a will.


An election is also possible under s.62 TCGA 1992 to deem the transfer of the asset to have been made by the deceased for CGT purposes. This means there is no disposal by the person making the variation and the new beneficiary will acquire the asset at probate value. This cancels any gain in the hands of the person making the variation.


THE DANGERS OF DIY WILLS


by Ashley Marshall Solicitor, Farleys


There has been a surge in the number people seeking to create a will as the events of the past year have increased the public’s awareness of the importance of ensuring their families and businesses are protected, should the worst happen.


Whilst this increased awareness in planning for the future is welcomed, another worrying trend is a rise in issues from individuals who have drafted their own wills, or relied on ‘off the shelf’ templates to convey their last wishes.


A DIY approach may seem quicker, easier and cheaper at the outset, but having a DIY will can be just as stressful for your family as not having one in place at all. A DIY will is likely to contain mistakes or omissions, leaving your family to argue over your estate.


It has been suggested that poorly drafted or ineffective DIY wills are responsible for a prolonged probate ordeal for 38,000 families a year. This is a worrying statistic given that up to 10 per cent of the value of a person’s estate can be engrossed by additional fees as a result of an ineffective will.


Upon your passing, your beneficiaries need to have a solid and structured document tailored specifically to your personal circumstances to ensure that dealing with your estate is as smooth as possible. Bespoke, professional legal advice can help you achieve this.


Instructing a solicitor to draft your will gives peace of mind that it is well-considered, well drafted and error free. They can also discuss estate planning to make your will as tax efficient as possible.


Planning for the future isn't always straightforward...


...but we believe the law should be.


A relatively small investment now can reduce stress and financial problems for you and your family in the long run.


Speak to our team for wills, trusts, and estate planning advice tailored to you.


www.farleys.com 01254 367 891


Offices across Lancashire & Greater Manchester LANCASHIREBUSINESSVIEW.CO.UK


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WILLS AND PROBATE


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