Can a Deed of Variation save IHT?

Keep_pedalling

buddy9 said:

getmore4less said:

 (Transfer of assets to spouse via DOV )

I think you can only transer assets via a deed of variation to a living person. The wife is deceased.

Not true, the DOV becomes effective from the date of the first death.

getmore4less said:.

 and spouse exemption available

The OP has stated that the estates were dealt with seperately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.

The estates would always have to be dealt with separately regardless of the clauses in the will. A DoV would make the first estate an exempt estate.

The OP should really take some professional advice on this.

buddy9

Keep_pedalling said:

buddy9 said:

The OP has stated that the estates were dealt with seperately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.

The estates would always have to be dealt with separately regardless of the clauses in the will. A DoV would make the first estate an exempt estate.

It was a poor description from myself. What I should have said is that the spouse did no inherit due to the provisions of the will

Langtang

Keep_pedalling said:

buddy9 said:

getmore4less said:

 (Transfer of assets to spouse via DOV )

I think you can only transer assets via a deed of variation to a living person. The wife is deceased.

Not true, the DOV becomes effective from the date of the first death.

getmore4less said:.

 and spouse exemption available

The OP has stated that the estates were dealt with seperately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.

The estates would always have to be dealt with separately regardless of the clauses in the will. A DoV would make the first estate an exempt estate.

The OP should really take some professional advice on this.

Yes, had there been 30 days or more between each of them passing then FIL's estate would have passed directly to MIL and then directly to my wife. As it was they were dealt with on a per person basis - hence the IHT bill for my FIL.

What I got wrong with my question was, I assumed that if you could have set up a DoV, that would have reduced the value of the estate, thereby having IHT taken from a smaller estate. It was a simple, but sill error. One of the few things that would have reduced the IHT bill would have been if my FIL had left some money to charity.

getmore4less

buddy9 said:

getmore4less said:

 (Transfer of assets to spouse via DOV )

I think you can only transer assets via a deed of variation to a living person. The wife is deceased.

getmore4less said:.

 and spouse exemption available

The OP has stated that the estates were dealt with separately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.

that's what the DOV achieves

The executor of an Estate can do a DOV on behalf of a deceased person but that is not needed here
The OP wife is the sole beneficiary,  she can DOV her inheritance from the FIL to the his spouse the MIL.

There may be one catch but I do not think it applies here, a DOV can not be done as part of a linked transaction to just avoid IHT.

eg. if the MIL were alive, the daughter could do a DOV as above but then the MIL should not gift any money back to the daughter but as the daughter inherits I don't think that counts but that's why when there is £90k+ at stake you get help.

We also have, 
FIL had shares, inheritance from sister and cash.

if the sister died less than 2 years ago a DOV by the executor of FIL estate can take that inheritance out of his estate.


Thing is OP says estate <1m  and used up most of the Nil rates bands available, that does not lead to a £110k tax bill when there is at least £950k of nil rate bands with a £300k house.

Langtang

getmore4less said:

buddy9 said:

getmore4less said:

 (Transfer of assets to spouse via DOV )

I think you can only transer assets via a deed of variation to a living person. The wife is deceased.

getmore4less said:.

 and spouse exemption available

The OP has stated that the estates were dealt with separately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.

that's what the DOV achieves

The executor of an Estate can do a DOV on behalf of a deceased person but that is not needed here
The OP wife is the sole beneficiary,  she can DOV her inheritance from the FIL to the his spouse the MIL.

eg. if the MIL were alive, the daughter could do a DOV as above but then the MIL should not gift any money back to the daughter but as the daughter inherits I don't think that counts but that's why when there is £90k+ at stake you get help.

We also have, 
FIL had shares, inheritance from sister and cash.

if the sister died less than 2 years ago a DOV by the executor of FIL estate can take that inheritance out of his estate.


Thing is OP says estate <1m  and used up most of the Nil rates bands available, that does not lead to a £110k tax bill when there is at least £950k of nil rate bands with a £300k house.

Thanks for the very detailed replies. I have to say, I really was being naive and thinking a DoV would save us IHT. 

All work is being carried out by our solicitor, so I am sure if there was a way….

You did actually lose me a bit in your reply. If my wife could DoV her dads inheritance to her mum, she would then have almost £600k cash, an no passing on of nrb etc. MIL is already at her limit, due to insurance bonds all being in her name as last to die. 

FIL’s sister passed away 3 weeks before him, intestate. 

FIL had not used house nrb at all, as it was deemed better to have that in MILs estate, but had used up way more than his £325 estate band ~ hence the IHT. 

Langtang

Keep_pedalling said:

The estates would always have to be dealt with separately regardless of the clauses in the will. A DoV would make the first estate an exempt estate.

The OP should really take some professional advice on this.

The estates have been dealt with, from the outset, by the family solicitor who was also an executor. 

getmore4less

Langtang said:

getmore4less said:

buddy9 said:

getmore4less said:

 (Transfer of assets to spouse via DOV )

I think you can only transer assets via a deed of variation to a living person. The wife is deceased.

getmore4less said:.

 and spouse exemption available

The OP has stated that the estates were dealt with separately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.

that's what the DOV achieves

The executor of an Estate can do a DOV on behalf of a deceased person but that is not needed here
The OP wife is the sole beneficiary,  she can DOV her inheritance from the FIL to the his spouse the MIL.

eg. if the MIL were alive, the daughter could do a DOV as above but then the MIL should not gift any money back to the daughter but as the daughter inherits I don't think that counts but that's why when there is £90k+ at stake you get help.

We also have, 
FIL had shares, inheritance from sister and cash.

if the sister died less than 2 years ago a DOV by the executor of FIL estate can take that inheritance out of his estate.


Thing is OP says estate <1m  and used up most of the Nil rates bands available, that does not lead to a £110k tax bill when there is at least £950k of nil rate bands with a £300k house.

Thanks for the very detailed replies. I have to say, I really was being naive and thinking a DoV would save us IHT. 

All work is being carried out by our solicitor, so I am sure if there was a way….

You did actually lose me a bit in your reply. If my wife could DoV her dads inheritance to her mum, she would then have almost £600k cash, an no passing on of nrb etc. MIL is already at her limit, due to insurance bonds all being in her name as last to die. 

FIL’s sister passed away 3 weeks before him, intestate. 

FIL had not used house nrb at all, as it was deemed better to have that in MILs estate, but had used up way more than his £325 estate band ~ hence the IHT. 

Pretty convinced now there are ways to reduce this IHT bill as the there are 2 DOV options to use.


DOV 1. Divert the sisters(dead less than 2 years) inheritance directly to daughter to reduce the FIL estate.
(should not change the tax position on that sisters estate)

DOV 2. Divert(some/all) the FIL estate to spouse
(not clear her how much that would save*) 


Wife then has £650k NRB and enough £350k RNRB to cover the £300k property.


I would be asking the Soliitor why that cannot be done(there may be some Scottish rules involved)


You say there is £110k IHT on FIL thats an estate of £600k 
then you say MIL estate is near her limit that's £325k
then a house of £300k
that's over 1m yet you say the estates together are under £1m

the numbers just don't add up.

How much did the FIL inherit from his sister?

getmore4less

Langtang said:

getmore4less said:

buddy9 said:

getmore4less said:

 (Transfer of assets to spouse via DOV )

I think you can only transer assets via a deed of variation to a living person. The wife is deceased.

getmore4less said:.

 and spouse exemption available

The OP has stated that the estates were dealt with separately due to the provisions of the will. No estate passed to the spouse so I don't think the spouse exemption is available.

that's what the DOV achieves

The executor of an Estate can do a DOV on behalf of a deceased person but that is not needed here
The OP wife is the sole beneficiary,  she can DOV her inheritance from the FIL to the his spouse the MIL.

eg. if the MIL were alive, the daughter could do a DOV as above but then the MIL should not gift any money back to the daughter but as the daughter inherits I don't think that counts but that's why when there is £90k+ at stake you get help.

We also have, 
FIL had shares, inheritance from sister and cash.

if the sister died less than 2 years ago a DOV by the executor of FIL estate can take that inheritance out of his estate.


Thing is OP says estate <1m  and used up most of the Nil rates bands available, that does not lead to a £110k tax bill when there is at least £950k of nil rate bands with a £300k house.

Thanks for the very detailed replies. I have to say, I really was being naive and thinking a DoV would save us IHT. 

All work is being carried out by our solicitor, so I am sure if there was a way….

You did actually lose me a bit in your reply. If my wife could DoV her dads inheritance to her mum, she would then have almost £600k cash, an no passing on of nrb etc. MIL is already at her limit, due to insurance bonds all being in her name as last to die. 

FIL’s sister passed away 3 weeks before him, intestate. 

FIL had not used house nrb at all, as it was deemed better to have that in MILs estate, but had used up way more than his £325 estate band ~ hence the IHT. 

by doing the DOV to spouse the estate becomes exempt of IHT and both nil rate bands transfer.

Langtang

getmore4less said:

DOV 2. Divert(some/all) the FIL estate to spouse
(not clear her how much that would save*) 


Wife then has £650k NRB and enough £350k RNRB to cover the £300k property.

Thanks again for your reply.

My MIL would not have £650k NRB, as she passed away 4 days after her husband, and so his estate wouldn't have passed to his wife anyway due to the 30 day clause in the will(s) , it went directly to my wife. If it were as easy as just DoVing across, I'm pretty sure our solicitor would have been  on to that.

As for sisters estate, my wife was FIL's step-daughter, so we weren't sure it was even going to come to my wife at all for a while due to the intestate nature of her estate..

getmore4less

Langtang said:

getmore4less said:

DOV 2. Divert(some/all) the FIL estate to spouse
(not clear her how much that would save*) 


Wife then has £650k NRB and enough £350k RNRB to cover the £300k property.

Thanks again for your reply.

My MIL would not have £650k NRB, as she passed away 4 days after her husband, and so his estate wouldn't have passed to his wife anyway due to the 30 day clause in the will(s) , it went directly to my wife. If it were as easy as just DoVing across, I'm pretty sure our solicitor would have been  on to that.

As for sisters estate, my wife was FIL's step-daughter, so we weren't sure it was even going to come to my wife at all for a while due to the intestate nature of her estate..

I would be asking why a DOV can't be done with for FIL estate to make it exempt?
I would be asking why a DOV cannot be done on the sisters estate to reduce the total estate


If the FIL sister died(intestate) before the FIL then any of her estate that came to him can be DOV to someone else to reduce the size of his estate, it is a case of deciding who needs to do it executor of fathers estate  or maybe his beneficiary

The daughter being a step daughter is not relevant if his will say she inherits.

Again why can't a DOV be done?

There are questions that  the solicitor needs to be answering.

With a potentially avoidable(reduced) £110k tax bill I would be wanting to know why this cannot be done not just sitting back hoping they got it right.