We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Deed of Variation

Options
Can someone tell me please, if a will is altered by deed of variation, what would the date of the inheritance be? The date of death or the date the trust was signed.
Thanks.

Comments

  • jimmo
    jimmo Posts: 2,287 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    I agree with hattybee and coolcait on your other thread on the bankruptcy forum.
    https://forums.moneysavingexpert.com/discussion/3429359
    From an Inheritance Tax and Capital Gains Tax point of view, the issue is pretty clear. A Deed of Variation changes the original will so that whoever the beneficiaries are (after the DOV) have inherited at the date of death of the deceased. Here is an example for IHT.
    http://www.hmrc.gov.uk/cto/customerguide/page21.htm#6
    Income Tax is rather different but, quite frankly, your problem doesn't seem to be tax related.
    Your real issue is the date you will be regarded as having inherited for bankruptcy purposes.
  • antrobus
    antrobus Posts: 17,386 Forumite
    Yes it's the date of death.

    In your specific circumstances, I might suggest that you tell the individual concerned that for 'tax reasons' it would be better if your children inherited the money rather than you. It then becomes their money not yours, but can still be spent on their education as necessary.

    Not that I know anything about Scottish inheritance and trust law you understand.
  • John_Pierpoint
    John_Pierpoint Posts: 8,401 Forumite
    Part of the Furniture 1,000 Posts
    edited 20 August 2011 at 12:13AM
    jimmo wrote: »
    I agree with hattybee and coolcait on your other thread on the bankruptcy forum.
    https://forums.moneysavingexpert.com/discussion/3429359
    From an Inheritance Tax and Capital Gains Tax point of view, the issue is pretty clear. A Deed of Variation changes the original will so that whoever the beneficiaries are (after the DOV) have inherited at the date of death of the deceased. Here is an example for IHT.
    http://www.hmrc.gov.uk/cto/customerguide/page21.htm#6
    Income Tax is rather different but, quite frankly, your problem doesn't seem to be tax related.
    Your real issue is the date you will be regarded as having inherited for bankruptcy purposes.


    This is the "one deed of variation" issue again (jimmo and I were debating this on another thread)
    https://forums.moneysavingexpert.com/discussion/comment/46103041#Comment_46103041
    The HMRC advice above says the deed must specifically say it is to be back dated to the date of death to be treated as a gift from the deceased as against a later gift from the named beneficiary.

    [Those who are wondering what "Section 142(1) mentioned in this link is all about:
    http://www.hmrc.gov.uk/cto/customerguide/page21.htm#6
    Can find the answer here:
    http://www.legislation.gov.uk/ukpga/1984/51/section/142
    142 Alteration of dispositions taking effect on death.
    (1)Where within the period of two years after a person’s death—(a)any of the dipositions (whether effected by will, under the law relating to intestacy or otherwise) of the property comprised in his estate immediately before his death are varied, or
    (b)the benefit conferred by any of those dispositions is disclaimed,by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions,
    [then]this Act shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.

    [F1(2)Subsection (1) above shall not apply to a variation unless the instrument contains a statement, made by all the relevant persons, to the effect that they intend the subsection to apply to the variation.(2A)For the purposes of subsection (2) above the relevant persons are—(a)the person or persons making the instrument, and(b)where the variation results in additional tax being payable, the personal representatives.Personal representatives may decline to make a statement under subsection (2) above only if no, or no sufficient, assets are held by them in that capacity for discharging the additional tax.]


    F1 S. 142(2)(2A) substituted for s. 142(2) (24.7.2002 with application as mentioned in s. 120(4) of the amending Act) by 2002 c. 23, s. 120(1)(4)

    The obvious solution is to hold the funds on trust for the children at age 18 !!?!! [It depends how you manage to bring them up to be responsible]

    How much money are we talking about?

    [If it is a modest (say 5 figure sum) the trust might well consist of a building society account with a both must sign withdrawal, arrangement with the settlor, your relative who is giving up his bequest, as your co-trustee. Having a single trustee is not a good idea as the suspicion will always exist that that trustee has not acted scrupulously honestly and if he/she dies the trust will have a temporary legal hiatus, while the situation is sorted out. I would say that such an arrangement would metaphorically, create a lovely luxurious soft white "shearling" fleece coat for a proud mum to wear.]
  • jimmo
    jimmo Posts: 2,287 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    This is the "one deed of variation" issue again (jimmo and I were debating this on another thread)
    https://forums.moneysavingexpert.com/discussion/comment/46103041#Comment_46103041
    The HMRC advice above says the deed must specifically say it is to be back dated to the date of death to be treated as a gift from the deceased as against a gift from the named beneficiary.

    [Though comparing this:
    http://www.hmrc.gov.uk/cto/customerguide/page21.htm#6
    with this
    http://www.legislation.gov.uk/ukpga/1984/51/section/142
    142 Alteration of dispositions taking effect on death.
    (1)Where within the period of two years after a person’s death—(a)any of the dipositions (whether effected by will, under the law relating to intestacy or otherwise) of the property comprised in his estate immediately before his death are varied, or
    (b)the benefit conferred by any of those dispositions is disclaimed,by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions, [then]this Act shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.

    [F1(2)Subsection (1) above shall not apply to a variation unless the instrument contains a statement, made by all the relevant persons, to the effect that they intend the subsection to apply to the variation.(2A)For the purposes of subsection (2) above the relevant persons are—(a)the person or persons making the instrument, and(b)where the variation results in additional tax being payable, the personal representatives.Personal representatives may decline to make a statement under subsection (2) above only if no, or no sufficient, assets are held by them in that capacity for discharging the additional tax.]

    F1 S. 142(2)(2A) substituted for s. 142(2) (24.7.2002 with application as mentioned in s. 120(4) of the amending Act) by 2002 c. 23, s. 120(1)(4)

    Suggests that HMRC is having trouble keeping up with amendments to its own legislation. In my opinion the advice should read 142 section 1 not 142 section 2, as section two is just instructions on how to give effect to section 1.]

    The obvious solution is to hold the funds on trust for the children at age 18 !!?!! [It depends how you manage to bring them up to be responsible]

    How much money are we talking about?
    Am I missing something here?
    Looking at the HMRC Advice
    http://www.hmrc.gov.uk/cto/customerguide/page21.htm#6
    there is a reference to S142(1) under the heading "I am a beneficiary. How do I make a variation?"
    I haven't found a reference to S142(2).
  • John_Pierpoint
    John_Pierpoint Posts: 8,401 Forumite
    Part of the Furniture 1,000 Posts
    edited 20 August 2011 at 12:23AM
    Sorry I must be going blind (or senile:D) - I've double checked and realise I must have got confused by the foot note that says section 2 has been modified.

    So I have gone back and corrected my original posting above - as we don't want to confuse anyone else!!

    "Tax does not have to be taxing" ?!?
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 351K Banking & Borrowing
  • 253.1K Reduce Debt & Boost Income
  • 453.6K Spending & Discounts
  • 244K Work, Benefits & Business
  • 598.9K Mortgages, Homes & Bills
  • 176.9K Life & Family
  • 257.3K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.