Excepted Estate - No Probate Required

Hal17

I am posting this for information only and would appreciate some help as I cannot find anything on line.

If you have an Excepted Estate that does not require probate as all the assets are in cash. There is only one beneficiary and they plan to do a Deed of Variation for the whole estate value within the 2 year period allowed.

If the sum they inherit is £200K and say after 18 months that value through interest or investments has grown to £250K, can they then action a DoV for this new value?

If you did not require Probate, how would anyone know, outside of the sole beneficiary what the original inheritance value was to start? Many thanks.

Keep_pedalling

No, you can’t vary the original amount of the original inheritance. Any gains will be subject to income tax or CGT so it is really depends on what you have done with the assets between the death of the testator and when the money is transferred to the new beneficiary.

If for example the cash never left the estate before being transferred to the beneficiary then the estate pays any IT due and the remainder can be transferred to the new beneficiary, 

If on the other hand the original beneficiary had received the money invested in ACME Inc in their own name then decided to do a DoV they would pay any tax on dividends plus any CGT on the gain. If they also pass on the remaining gain I am pretty sure that counts as a gift and only the original inheritance value would be covered by the DoV. 

poseidon1

The deed of variation can only address the specific assets at date of death.

Any dividend or interest income post death belongs to the primary estate beneficiary after deduction of estate income tax at 8.75% and 20% respectively. They are free to give that net cash  away if they wish, but the DOV has no bearing thereon.

As for investment growth on the original stockmarket assets at death, that is accommodated within the DOV as long as the variation includes a CGT certification to avoid a CGT liability being triggered inadvertently on such assets. If you have not already done so, suggest  you acquaint yourself with the DOV checklist below, with particular reference to notes 4) and 5) on page 2 pertaining to stamp duty and CGT certificate wordings where stockmarket securities are involved.

https://assets.publishing.service.gov.uk/media/5a7df4d040f0b6230268838d/IOV2.pdf

The variation once executed, should be kept with beneficiary's will, together with precise details of the assets varied, bearing in mind  ( in this case) there is no independent probate evidence of this.

Is this an actual circumstance in exsistence, or just a 'what if' scenario?

Hal17

Thank you both for your excellent replies and prompt response, very much appreciated. I will read the link that you kindly posted.

This could be an actual circumstance if my father does not use all his cash assets on care costs.

My thought process was if the original cash inheritance was left in a fixed 18 month bond and then on maturity the full value of the matured bond was passed on via a Deed of Variation. As we would not require probate, other than myself as the sole original beneficiary, no one would know what the initial value was? 

poppystar

I may be missing something here but is there any reason why you can’t immediately do a DoV and then the new beneficiary uses the same fixed term bond you mention? The end result would be what you wanted albeit that any savings interest due would be payable by the new beneficiary rather than the estate of the deceased.

Hal17

poppystar said:

I may be missing something here but is there any reason why you can’t immediately do a DoV and then the new beneficiary uses the same fixed term bond you mention? The end result would be what you wanted albeit that any savings interest due would be payable by the new beneficiary rather than the estate of the deceased.

That would be easier but there are various factors that might come into play. The DoV value might be different and the beneficiaries might change. Having the two year period allows choices. It will not be a problem however it pans out.

My original post was really to understand the dynamics, as I read a single article that said you could pass on any additional value that the original inheritance increased within the DoV two year grace period.