Deed Of Variation to avoid tax

TotalTurtle

I'm currently the sole beneficiary of my mother's estate. I've taken into account both her personal and residential tax-free allowances, but a fair bit of her estate is still going to fall into the 40% tax zone.

I would like to draft a Deed Of Variation, to redirect the excess taxable amount to my father instead, so he can have it tax-free.

(1) Would it be sufficient to say that "any portion of the Deceased’s estate that would be subject to inheritance tax shall be redirected to the Deceased's spouse instead", or is there some more common/legal wording that is used in cases like this?

(2) Is it best to submit the Deed Of Variation alongside the will when applying for probate, or is there any advantage to waiting until after the tax bill has been issued?

(3) Assuming that the tax bill I receive is zero, how do I know how much I need to redirect to my father? The exact value of my mother's estate could vary quite a lot depending on which gift allowances HMRC decides to allow, so would they at least tell me that much ordinarily?

Robin9

Others will correct me but as your father is not a beneficiary he cannot vary what he is not getting - and even if he was he can only vary downwards.

getmore4less

There is important wording required.

if your research has not found that it may be better to take legal/tax advice to get it right.

The estate administrator needs to be involved as this is going to reduce the estate tax.

If you are unsure of the relevant gift exemptions you would be advised to get legal/tax advise on getting that right.

What gifts do you think should get an exemption?

Unusual to not have provision for a living spouse.

getmore4less

Robin9 wrote: »

Others will correct me but as your father is not a beneficiary he cannot vary what he is not getting - and even if he was he can only vary downwards.

The beneficiary is the OP they do the DOV.

Tom99

If you wanted to follow the wording you suggestmaybe say 'everything in excess of the available NRB and RNRB after gifts are taken into account'.
Alternatively you could pass the whole estate to your father who would then inherit your mother's NRB and RNRB. Your father then gifts you money as a PET and if he survives 7yrs will have the benefit of both allowances on his own estate.

Keep_pedalling

What sort of gifts are you concerned that HMRC would disallow?

How big is your father’s estate. Transferring a substantial ho him could just be kicking the tax bill down the road,

SevenOfNine

There's some help here, a checklist to ensure you cover all the conditions required.
https://www.gov.uk/government/publications/inheritance-tax-instrument-of-variation-checklist-iov2

We did a DoV to redistribute funds differently but chose to use a STEP registered solicitor to draw it up. 4 years ago it cost £450, we considered that a drop in the ocean of the redistribution value & to be sure it was watertight.

I do believe there are is a phrase that need to be used, & I think ours has it - no idea exactly what it means or if it would apply to your scenario.

PS edit: I think the phrase is to comply with this (that I just googled) "it must include a statement, in a prescribed form, that the beneficiaries intend the variation to be effective for IHT and/or Capital Gains Tax (CGT) purposes".

BootcamperHF

I assume your parents were still married when your mother died? Otherwise the amended bequest to your father via the DOV is not to a surviving spouse.

relaxtwotribes

Keep_pedalling wrote: »

How big is your father’s estate. Transferring a substantial ho him could just be kicking the tax bill down the road,

In addition to which, the RNRB reduces by £1 for every £2 in the estate over £2 million. Something to consider when looking at both parents' estates.

Brynsam

If you're about to inherit a lot of money, spend some of it on getting proper professional advice. Amateur tinkering won't cut it. Alternatively, why not follow your mother's wishes and accept some IHT will be payable on your inheritance?