Deed of Variation Criteria

ChilliBob

Hello Everyone,
As posted on here some time ago both my aunt and uncle passed away in 2019, October and August respectively. Both without a will. My Mum and cousin are the beneficiaries of the will and this has all been sorted with a probate solicitor over many months. My Mum wants to share her portion of the estate out to her three sons, and her five grandchildren (she's aware of the age restriction which makes it difficult for a couple of them, she may do something else here).

We were under the impression that we needed to complete a deed of variation, otherwise, if we did not, and my mum passed away within seven years of this gift, everyone in receipt of it would have to pay tax on it?

She's spoken to the guy who helped her do her tax return for this late last year, and he seems to think she doesn't need to do one because the combined amount is less than 1mn or something. 

Having had to pay several hundred thousand in inheritance tax has really irritated her as she knows how hard her own mother and father worked and the hardship they suffered earlier in life when she was very young, so, the thought that it would in effect be 'double taxed' is something she's very keen to prevent.

I've suggested she consult a second professional for advice but I thought I'd canvas on here for opinion too as I know there's some super knowledgeable people in this subject on here (unfortunately )

Thanks in advance  

getmore4less

Not going back over posts.

How much money are we looking at. 

There is no gift tax and recipients don't pay tax on most failed PETS.

ChilliBob

I'm honestly not sure exactly but I do know it's less than £1mn. I think my Mum was thinking of distributing about 250k or so, and having some for herself, so my best guess would be < 400k as her portion. My cousin similar.

getmore4less

Why was there £100ks of IHT? 

ChilliBob

That's what the solicitor and HMRC calculated, I think it was about 300k my mum had to pay from the estate (still not finalised but some stuff has been paid to her)

RAS

So mum's portion after IHT is paid is less than £1m, which means that the uncle and aunt were worth well over £2m?
Is the cousin a child of the uncle and aunt?
Were the uncle and aunt married to each other?
And were their full residential nil rate band allowances used?

Marcon

ChilliBob said:

I'm honestly not sure exactly but I do know it's less than £1mn. I think my Mum was thinking of distributing about 250k or so, and having some for herself, so my best guess would be < 400k as her portion. My cousin similar.

Maybe spend some money on proper legal advice if that's the sort of amount being considered. 

ChilliBob

It's under 900 after this share discovery. Collectively my Mum and cousin have paid 160k in iht, the extra I had counted was because my Mum initially didn't break down between iht and cgt from a house sale.

We have a solicitor involved, she has advised a tax specialist is required for the deed of variation. Its the tax specialist who is saying its not required, which is great if right, but we just wanted to be sure. 

ChilliBob

To add to this, the 700-900 or so is split between two, hence my Mum would have about 400 or 450. According to https://www.gov.uk/inheritance-tax/gifts#:~:text=You can give them as,7 years before your death.

She can give 325 regardless of 7 years with no tax implications.

However, she obviously has her own estate, circa 500k which she is thinking about from a. Iht perspective too.

relaxtwotribes

RAS said:

So mum's portion after IHT is paid is less than £1m, which means that the uncle and aunt were worth well over £2m?
Is the cousin a child of the uncle and aunt?
Were the uncle and aunt married to each other?
And were their full residential nil rate band allowances used?

I suspect the cousin is not a child of the uncle and aunt because he/she would inherit under intestacy and ChilliBob's Mum would not be involved.  And it follows that the RNRB would be lost.
The starting point must be what is the estate of Mum worth?  Both now and after her parents pass.

relaxtwotribes

ChilliBob said:

She can give 325 regardless of 7 years with no tax implications.

Yes, but be aware that gifts use up the £325k allowance FIRST.