Deed of variation / discretionary trusts question

robledouk

Hi, my mum was recently widowed leaving her with the house and capital. We've decided to do a deed of variation for dad's half of the house to pass by the IHT....but have a question about the capital side of things.

Basically the capital provides a susbstantial amount of interest each month that helps my mum pay the various bills and so forth. She wont need it forever though.....

My question is can the money later be gifted as long as she lives 7 years after the gift was made? I'm not sure if it's considered a gift from income?

or put into a discretionary trust?

I'm not sure if the above will help avoid IHT (or 'tax planning' )?

My other question was - can a deed of variation only be adjusted once within 2 years or can you make a further change(s) as long as it's within the 2 years?

I'm not too clued up on these subjects and will see somebody who knows more on the subject, but would appreciate any of your advice.

Thanks for your time

elliebean_2

robledouk wrote:

Hi, my mum was recently widowed leaving her with the house and capital. We've decided to do a deed of variation for dad's half of the house to pass by the IHT....but have a question about the capital side of things.

Basically the capital provides a susbstantial amount of interest each month that helps my mum pay the various bills and so forth. She wont need it forever though.....

My question is can the money later be gifted as long as she lives 7 years after the gift was made? I'm not sure if it's considered a gift from income?

Your mum could make a one-off gift (from capital and/or income) and so long as she survived a further 7 years the gift would fall outside her estate for IHT purposes. Alternatively, she could make regularl gifts from her income so long as it did not affect her standard of living. These would be exempt from IHT.

robledouk wrote:

My other question was - can a deed of variation only be adjusted once within 2 years or can you make a further change(s) as long as it's within the 2 years?

As far as I'm aware a Deed of Variation can only be done once in the 2 years following a death, and all benficiaries have to agree to it.

robledouk

Paul_Varjak wrote:

There is a potential problem here. Was the house (or any other assets) in joint ownership at the time of your father’s death, or were they owned solely by your father or as ‘Tenants in Common’? If held as “Tenants in Common” or solely by your father then I think a simple deed of variation will be required.

But, if held in ‘joint ownership’, then you may have a bit of a problem; it may be possible to change ownership to ‘Tenants in Common’ by use of a Deed of Variation, but this is really very specialised and I doubt you could get a satisfactory answer here. You do really need advice on this subject from an IHT specialist!

I suggest you may care to ask your questions here: http://www.taxationweb.co.uk/

Hi it was joint ownership .We've already seen an IHT specialist on this issue and can put his half of the house away thankfully.

Thanks for your replies

elliebean_2

Paul_Varjak wrote:

But, if held in ‘joint ownership’, then you may have a bit of a problem; it may be possible to change ownership to ‘Tenants in Common’ by use of a Deed of Variation, but this is really very specialised and I doubt you could get a satisfactory answer here. You do really need advice on this subject from an IHT specialist!

When doing a Deed of Variation a property can also have the tenancy severed retrospectively, ie changed from joint tenants to tenants in common.