Using Deed of Variation question

Sea_Shell

This is currently hypothetical, but could become an issue.

Parents home (£400k) left to two adult children, one resides in the property, with their children.

They can't afford to buy out other sibling entirely.

They could raise maybe £100k via a mortgage.

So AIUI, a DoV could be written to effectively pass the £100k "shortfall" to the resident sibling?

However, could the £100k paid, also be passed on via another (same) DoV to Niblings.

Basically, Niblings to get hard cash, rather than a share of the property IYSWIM.  

Sea_Shell

Anyone?

Would this be possible?

Alternatively, what wording should parents will HAVE, that would do this automatically.

"I hereby leave my home split 75% to my child (name) and the remaining 25% to be liquidated and passed to my grandchildren in equal proportions."  or suchlike.

I know I said this was hypothetical* (at this moment in time), but it would be helpful to know if this is something that can be done, or not.  

Obviously the £100k raised via a mortgage, could just be passed to the Niblings as a gift, but that runs the risk of falling foul of the 7 year rule.   (ones estate would already be liable for IHT, before any such inheritance)

So to sort it out, at source, would be better, if possible to do so.   

I suppose one could otherwise just do a DOV to pass the whole 50% ownership share onto the Niblings, but that could be quite a burden for them, and also deprive them of any first time buyer status.   I'd rather not throw them under that bus. 

I could just ask to be dis-inherited, and the whole shebang be left to my sibling.   But that is complicated by the fact that their spouse is not the father of (all) the Niblings, so no guarantee that they would ever see a penny.



*Hope you won't hold that against me.

Sea_Shell

Thanks for that.

As I thought, not straight forward.

Your first paragraph sums up what will probably have to happen BUT, can I trust them to actually DO that? Hmm

Sibling unlikely to ever be in IHT territory, so they could gift, no problem.

That's why I was thinking outside the box, as it were.

Sea_Shell

If I were to gift £100k to Niblings outside of a DoV, would my DH inherit the "7 year clock", if I met an untimely demise, or, because my estate would pass to him free of any IHT, the clock stops?

Without spousal exemption, my estate, in isolation, would probably be in IHT territory, especially once pension pots are to be included.

Would DHs estate (effectively now the joint estate) be liable for this, or as long as either of us live 7+ years, we're ok?

Sea_Shell

Great explanation, thanks.  


What happens if DH lives another 20+ years by then, and he fails to keep records, and his executors don't know that the full spousal exemption is not available to be claimed?

Is HMRC joined up to put 2 and 2 together, when they apply for DH's probate?  

Sea_Shell

If your widowed spouse remarries, that no doubt muddies the waters even further. 😉🤔