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WILLS AND PROBATE
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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) and capital gains tax (CGT) 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, with the amended gift deemed to have been made by the deceased.
This means that the tax planning window does not necessarily close at the date of the taxpayer’s death.
A variation does not have to be made by deed – it can be done by letter or other formal document.
The statement must be made within two years of death, it must be in writing and signed by the person, or persons, making the variation.
Variations can be made in respect of property passing under the law of intestacy. They can also be used to sever a joint tenancy so that the property can be passed under the will.
Any transfer must not be made in return for consideration in money or money’s worth. “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. This deems the deceased as making the transfer of an asset for CGT purposes.
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.
MINIMISING YOUR We are Marsden
How we can help you? Disputes and debts Family Law Personal Injury Wills, Trusts and Probates Residential Property Commercial Property Employment Law Company and Commercial Law
INHERITANCE TAX BURDEN by Zoe Fleming
Rawsthorn Solicitors. A client focused law firm based in Fulwood - Preston and Chorley
Legal director, Marsden Rawsthorn
The recent cost of living crisis has highlighted how expensive it is to bring up a child.
If a grandparent would like to contribute toward their children’s or grandchildren’s finances, here are two things to consider:
Make a gift
This is an easy way to reduce the value of your estate for Inheritance Tax (IHT) purposes.
So long as you live for more than seven years after you have made the gift, your family won’t have to pay IHT on your gift when you die.
Everyone has a £3,000 annual allowance each tax year (known as your annual allowance).
Tel: 0800 294 4410 Email:
info@marsdenrawsthorn.com
www.marsdenrawsthorn.com
LANCASHIREBUSINESSVIEW.CO.UK
This means that you can give away assets up to the value of £3,000 in a tax year without it being added to the value of your estate on your death and without having to survive seven years.
Any part of the annual exemption which is not used in the tax year can be carried forward for one year.
If you have sufficient income to maintain your usual standard of living you can also make gifts of your surplus income, in addition to your £3,000 annual allowance.
These gifts can pay for your grandchildren’s school fees or give them a monthly living allowance.
A trust
If you want to do something more substantial by setting aside a lump sum to provide financial support for years to come, you may wish to consider a trust for your grandchildren.
If you survive seven years from the date you put the assets into the trust, the funds given away will fall outside your estate for IHT purposes thereby avoiding a 40 per cent tax charge.
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