Deed of Variation / Joint Accounts

Osh3may

My dad died last November and I've found the various threads and comments on this forum very useful, so thanks!

He died interstate and we've had a solicitors letter outlining what me and my brother are due under the laws of intestacy. Me, him and my mum are still around and the only beneficiaries. My dad had a 2nd house in his sole name which my brother would like (£162,500 is a real valuation) and has suggested I receive the same amount in cash and we if we all agree, which we all do, we can get a Deed of Variation drawn up to reflect that.

Looking at the estate, I can see that to get £162,500 in cash would involve money that was held in a joint account he had with my mother, so am I correct in assuming the amount in there cannot be redistributed in a DoV in that under survivorship its not part of my late fathers estate any more (even though he contributed 100% of the amount in there) so even if we all agreed we couldn't do it that way?

If so, would that then make the only option to make a deed of variation for the amount he had under his sole name then make a deed of gift (so 7-year rule) for the remainder from my mother?

Thanks for any help!

Keep_pedalling

You are correct about the joint account it is not part of his heritable estate so it is now your mother’s outright. (I am assuming this is not a Scottish estate here, if it is things are somewhat different)

In any case a deed of variation is a very bad idea when the variation takes an inheritance from a spouse to someone else because anything left to a spouse is covered by spousal exemption so it is better for the surviving spouse to gift an inheritance away rather than make a DoV.

What is the total value of his heritable estate? If less than £322k then it all goes to his spouse.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6669203/deed-of-variation-joint-accounts

You say "your mum" but was she his wife at the point of death? Im guessing she was but it's a bit of an assumption with significant impacts if it's not true.

Money in a joint account is fully owned by both parties so when your father died it became purely her money and is not part of the estate. Doesnt matter who paid the money in, the second it went into they both owned it 100%. She could choose to give one of you some or all of it but that wouldnt be from the estate and could have implications if she dies within 7 years.

Osh3may

We are based in North Wales.

Heritable assets are 2 houses in sole name and about 100k in cash in his sole name. Solicitor reckons under intestacy me and my brother are to split £151k between us (estate approx 625k). I think the reason for the deed would be to take money out of my mothers estate and to circumvent the 7 year rule for gifting. If the house is valued at £162,500 and I get the same amount in cash that's the £325k NRB for IHT.

Osh3may

https://forums.moneysavingexpert.com/discussion/comment/82006284#Comment_82006284

Yes they were legally married and living in the same house at the time he died.

So it looks like a DoV signed by all of us that my brother inherits the house and I receive all the cash in his sole name (100k) then a separate deed of gift for the remaining £62,500 (which is subject to the 7 year rule) from my mum is probably the best way to go about it.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82006298#Comment_82006298

It circumvents the 7 year rule but at the same time it takes the transferable NRB exemption away from your mother’s estate hence at best it is just pointless at worst it could have a negative IHT impact on your mother’s estate. If you mother is happy do do this and it does not have any deprivation of assets consequences it would be better if she simply gifted the additional amount to you and your sibling.

For example Mr A dies and leaves everything (£500k) to Mrs A. This leaves Mrs A with net worth of £1M. If she makes a DoV for £325k to go to her children or gives the same amount through a simple then her net worth drops to £675k. If she dies within a short time after doing that then in the case of a DoV the vale of her estate for IHT purposes is £675£ and hers estates total exemptions will be £675k so no IHT, for a simple gift the estate is still £1M but the estate also has both transferable NRBs so has exemptions totally £1M and again no IHT to pay.

If on the other hand she lives another 7 years and the value of her estate has increased by £100k in that time the disadvantage of a DoV becomes evident.

Dying with an estate worth £775k seven years after making a DoV means that £100k of that is going to be taxed at 40% because her estate only has £675k in exemptions. If she had made a simple gift then that would have fallen out of her estate and there will still be £1M of exemption so no IHT due. The DoV would have been a £40k mistake.

Osh3may

Thanks for the reply!

So my mother would be better off just gifting the house and cash as even if she died within the next 7 years it wouldnt matter if the estate was under 1m so covered by all the bands (NRB and RNRB added together for her and my dad which we wouldnt have used)

So the £151k we were due under intestacy, is that just disregarded in preference of the gift? Just make a note of it somewhere in amongst our documents?

Keep_pedalling

In the simplified example I gave the full £1M would be available but the £151k that goes to you and your sibling reduces the transferable NRB by that amount so you mother’s estate will have a total exemption of £849k which is still better than £650k

Osh3may

Makes sense, thanks!

It appears it was our solicitor who was keen on doing the DoV, but as you point out gifting would be the most sensible option. A gift would probably fall out of the estate (of my mum) as a PET whereas a DoV would definitely used up 325k of the potential 1m threshold.

IF it came to deprivation of assets I dont think theres much difference between a DoV and a Gift, so there isn't anything to gain there either.

From a quick google it looks like you need a legal 'Deed of Gift' for property, whereas a monetary gift just needs a detailed note with all the details on. Does that sound about right?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82007045#Comment_82007045

I suspect a deed of gift will be a necessary prelude to the TR1 land register transfer from father's intestate estate to your brother.

Since the property does not automatically accrue to your mother by intestacy , you will need a bridging document after probate to show she elects to recieve it as part of her statutory £322k legacy (plus half the remaining assets) in order to personally gift the property on to your brother.

Osh3may

https://forums.moneysavingexpert.com/discussion/comment/82007144#Comment_82007144

Thanks for that. First I've heard of a bridging document, what's the process for getting one of those?

The property is unregistered. Does that make it easier of harder?! So the first registration with LR would be my brother, we have the physical deeds in my dads name from 1972 when they bought it.