Deed of variation: How long does it take for a deed of variation to be effective?

crislauri

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

naedanger

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

I am not sure this will work as intended.

Where a variation is made and assets from outside the estate are used to compensate the original beneficiary for their loss, the variation will not be treated as if the deceased had made it. For example, A dies leaving an estate of £300,000 to his sons. They sign a variation to give the assets to their mother. To compensate them, their mother pays them £300,000 from her own assets. Even if the variation contains a statement of intent, it will be ignored in working out the IHT that is payable on A’s death.

source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/373615/IOV2.pdf

Keep_pedalling

naedanger said:

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

I am not sure this will work as intended.

Where a variation is made and assets from outside the estate are used to compensate the original beneficiary for their loss, the variation will not be treated as if the deceased had made it. For example, A dies leaving an estate of £300,000 to his sons. They sign a variation to give the assets to their mother. To compensate them, their mother pays them £300,000 from her own assets. Even if the variation contains a statement of intent, it will be ignored in working out the IHT that is payable on A’s death.

source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/373615/IOV2.pdf

I am sure it is a non starter. Note 9 on the document you linked to makes it quite clear that you can’t simply dodge IHT by doing what the OP is attempting. 

Sea_Shell

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

As I understand it, a DoV cannot change the IHT status of your fathers estate.   

Only if your inheritance would push you into IHT territory, would a DoV be of use, as it allows you to bypass ever receiving the money and you can then nominate who it goes to instead.

Keep_pedalling

Sea_Shell said:

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

As I understand it, a DoV cannot change the IHT status of your fathers estate.   

Only if your inheritance would push you into IHT territory, would a DoV be of use, as it allows you to bypass ever receiving the money and you can then nominate who it goes to instead.

They can do, a DoV in favour of a charity would reduce the amount of IHT due, as would the OPs DoV if the money was staying with their mother, and not being fed back to the original beneficiaries.

In this case the time for IHT mitigation has long gone.

crislauri

Keep_pedalling said:

naedanger said:

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

I am not sure this will work as intended.

Where a variation is made and assets from outside the estate are used to compensate the original beneficiary for their loss, the variation will not be treated as if the deceased had made it. For example, A dies leaving an estate of £300,000 to his sons. They sign a variation to give the assets to their mother. To compensate them, their mother pays them £300,000 from her own assets. Even if the variation contains a statement of intent, it will be ignored in working out the IHT that is payable on A’s death.

source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/373615/IOV2.pdf

I am sure it is a non starter. Note 9 on the document you linked to makes it quite clear that you can’t simply dodge IHT by doing what the OP is attempting. 

thank you all, but the idea is that my mother would gift us the money once she has received and cleared all the inheritance.  So she would be gifting us from her money later on.  Perhaps there is a certain amount of time one needs to wait until the money is gifted for it to be accepted?  Is that an option?

Marcon

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

Sounds as if you are using the DIY approach, which could explain your confusion. Perhaps a bit of proper legal advice to ensure all parties are clear on what is being done/what it will achieve might be the best idea - and you could all draw up your own wills (or update them) at the same time?

Keep_pedalling

crislauri said:

Keep_pedalling said:

naedanger said:

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

I am not sure this will work as intended.

Where a variation is made and assets from outside the estate are used to compensate the original beneficiary for their loss, the variation will not be treated as if the deceased had made it. For example, A dies leaving an estate of £300,000 to his sons. They sign a variation to give the assets to their mother. To compensate them, their mother pays them £300,000 from her own assets. Even if the variation contains a statement of intent, it will be ignored in working out the IHT that is payable on A’s death.

source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/373615/IOV2.pdf

I am sure it is a non starter. Note 9 on the document you linked to makes it quite clear that you can’t simply dodge IHT by doing what the OP is attempting. 

thank you all, but the idea is that my mother would gift us the money once she has received and cleared all the inheritance.  So she would be gifting us from her money later on.  Perhaps there is a certain amount of time one needs to wait until the money is gifted for it to be accepted?  Is that an option?

We know what the idea is but if you read  note 9 in the link naedanger posted you will see it is not allowed. Try it and not only will you face paying the IHT and could end up with a hefty fine as well.  

You can’t dodge IHT just be creating a DoV and then be given back your inheritance, if it was that simply everyone in your situation would be doing it.

Does the value of the combined estates of your parents exceed £1M? If not then it is unlikely that any IHT would be due on your mother’s estate if you simply carried out the DoV and receive your inheritance on her passing.

naedanger

crislauri said:

Keep_pedalling said:

naedanger said:

crislauri said:

Hello, we are planning to do a deed of variation to my father's will so that my mother inherits everything and can then gift it to us in the hope that she will live for at least the next 7 years.  so once the deed of variation is sent in, is there a waiting time for her to be able to gift us all the assets she has inherited? or can it be done with immediate effect?   Also as we need to pay the tax by end of the month, it will before we make the deed of variation and as such would we need to pay the tax on what is currently stated in the will?  So we will be overpaying at first and then once we put in the deed of variation would HMRC give us the money back?  Any advice on these matters would be greatly appreciated! thank you

I am not sure this will work as intended.

Where a variation is made and assets from outside the estate are used to compensate the original beneficiary for their loss, the variation will not be treated as if the deceased had made it. For example, A dies leaving an estate of £300,000 to his sons. They sign a variation to give the assets to their mother. To compensate them, their mother pays them £300,000 from her own assets. Even if the variation contains a statement of intent, it will be ignored in working out the IHT that is payable on A’s death.

source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/373615/IOV2.pdf

I am sure it is a non starter. Note 9 on the document you linked to makes it quite clear that you can’t simply dodge IHT by doing what the OP is attempting. 

thank you all, but the idea is that my mother would gift us the money once she has received and cleared all the inheritance.  So she would be gifting us from her money later on.  Perhaps there is a certain amount of time one needs to wait until the money is gifted for it to be accepted?  Is that an option?

There is no time limit mentioned in the notes I quoted above, and I think if there was one then it would be mentioned. Also the purpose of a deed of variation it to effectively rewrite a will. But that is not what you are planning since unlike an inheritance your mother would have to pay back the money she received via this "dov" later.

If you still plan to proceed with this arrangement I definitely think you should get professional advice. 

getmore4less

What sort of numbers are we talking about.

Is there a house involved  

Do you need the transferable nil rate band to reduce the potential IHT on mothers estate?

what size would the gifts be.


There will be options.

getmore4less

probably worth a good read of the HMRC manual

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm35000

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm35093