Deed of variation - possible to amend?
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I am not a lawyer and I may be a million miles out but I'm thinking you've not relinquished your inheritance but simply signed a document that allowed his wife to obtain a mortgage to enable her to continue living in the flat. Presumably at the time of your father's death there was a mortgage on the flat?0
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How much equity/mortgage was there at DOD.0
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[FONT=Verdana, sans-serif]I take your point, not a easy read, seems to me:[/FONT]
[FONT=Verdana, sans-serif]The will gave wife a life interest in the property and contents but the then mortgage was to be paid out of the residual estate.[/FONT]
[FONT=Verdana, sans-serif]The DOV gifts 100% of the property to wife subject to:[/FONT]- [FONT=Verdana, sans-serif]Wife taking over then mortgage.[/FONT]
- [FONT=Verdana, sans-serif]44.05% of later sale proceeds paid back to Trustees less any interest paid by wife on then mortgage.[/FONT]
- [FONT=Verdana, sans-serif]Wife may replace mortgage with another but not for greater than £167,850.[/FONT]
- [FONT=Verdana, sans-serif]Wife can pay off the Trustee's 44.05% loan at any time. [/FONT]
[FONT=Verdana, sans-serif]But lets assume the value was £300,000 and the mortgage £167,850 (55.95%). The mortgage is to be paid from the residual estate but maybe there was not enough money and the Trustees were not in a position to take over the mortgage.[/FONT]
[FONT=Verdana, sans-serif]Had the property then been sold the net proceeds would have been 44.05% of the £300,000 sale price (£300,000 - £167,850 = £132,150).[/FONT]
[FONT=Verdana, sans-serif]The DOV effectively sells the mortgaged 55.95% of the property to the wife in return for taking over the interest payments on this mortgage whilst she lives there.[/FONT]
[FONT=Verdana, sans-serif]However since a rent free life interest of the whole was originally granted then the interest wife has paid on this mortgage is deducted from the 44.05% equity loan.[/FONT]
[FONT=Verdana, sans-serif]In both cases wife has occupation for life but you have swapped:[/FONT]
[FONT=Verdana, sans-serif]100% of property but subject to a 55.95% loan.[/FONT]
[FONT=Verdana, sans-serif]for:[/FONT]
[FONT=Verdana, sans-serif]44.05% of property but reduced by interest paid on 55.95% loan.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]Since wife is financing 55.95% of the property its only fair that she receives 55.95% of any increase/decrease in value. There may well have been other ways of financing the mortgage such that you retained all of the increase in value but the deal agreed has save you having to make the interest payments when due so is not particularly one sided.
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Thanks so much for your help so far on this - I really appreciate this. I think I understand it far better now, but am still wondering why other options weren't explored at the time.
To answer your questions - when my father wrote his will, he had assumed that his life policies would pay off the outstanding mortgage on the flat. Unfortunately they didn't which is why there were these problems. I guess this is why he assumed his wife could live at the property rent-free. For clarification, the property was valued at £300K (with a mortgage of £167K outstanding) when my father died 6 years ago.
Knowing that she obviously couldn't live there rent-free, what do you think should have happened? Wouldn't it have been better to have sold the flat? Should my brother and I have had to pay back her mortgage - how can she benefit from the capital appreciation if my brother and I are paying her mortgage back - after all, she was only meant to live there, not profit from any appreciation. What about the capital gains tax when it is sold? Should I be fighting to have this property transferred to my brother/my names? Also if his wife owns it 100% then couldn't she dispose of it however she wishes without telling us? Or bequeath it to someone in her family in her will? I do worry that we have no rights over it now.
Many thanks again0 -
You only have to pay the mortgage interest incurred by the wife back not the capital sum of the mortgage.earlycomputers wrote: »Thanks so much for your help so far on this - I really appreciate this. I think I understand it far better now, but am still wondering why other options weren't explored at the time.
To answer your questions - when my father wrote his will, he had assumed that his life policies would pay off the outstanding mortgage on the flat. Unfortunately they didn't which is why there were these problems. I guess this is why he assumed his wife could live at the property rent-free. For clarification, the property was valued at £300K (with a mortgage of £167K outstanding) when my father died 6 years ago.
Knowing that she obviously couldn't live there rent-free, what do you think should have happened? Wouldn't it have been better to have sold the flat? Should my brother and I have had to pay back her mortgage - how can she benefit from the capital appreciation if my brother and I are paying her mortgage back - after all, she was only meant to live there, not profit from any appreciation. What about the capital gains tax when it is sold? Should I be fighting to have this property transferred to my brother/my names? Also if his wife owns it 100% then couldn't she dispose of it however she wishes without telling us? Or bequeath it to someone in her family in her will? I do worry that we have no rights over it now.
Many thanks again
The wife can sell the property any time she likes but would have to pay you back what you are owed. Lets assume the property sells this year for £400,000 and the mortgage being interest only still has £167k outstanding. Costs of sale lets say £5000.
You and your brother will get 44.05% x (£400k-£5k) = £174k but less the interest paid by wife on mortgage since the DOV was signed say £167k at 3% x 6yrs = £30k.
So you get a net £174k - £30k = £144k
Wife will get £400k-£5k-£167k-£174k=£54k plus the return of the £30k interest she has paid in the past 6yrs
Had the flat been sold when your father died you would have got a net £300k - £167k = £133k but the wife would have had a life interest in that £133k so it would not have been yours for some years to come.
The DOV provided a solution to the problem you had at the time and whilst other solutions might have been possible if you could have raised the finance at the time, the deal reach is not particularly unfair to either side so I don't think you would stand much chance of unwinding it now 6yrs later.0 -
Many thanks again for your thorough reply - that’s very helpful. So to sum up, would my father’s wife have more ‘rights’ over the property because she owns it fully? Could she leave it to others in her will for instance? Has this current situation meant that when the property is disposed of there will be way more capital gains tax being deducted? Lastly, is there ever a situation whereby a deed of variation can be revoked or amended? Many thanks again0
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The fundamental problem is that a DOV has to be done within two years. AFAIK after that you are stuck with it unless you can prove fraud. You just need to accept that it is. Lost cause. You really need to go and consult a paid professional rather than asking more here. Without seeing ALL the documents nobody can help you.earlycomputers wrote: »Many thanks again for your thorough reply - that’s very helpful. So to sum up, would my father’s wife have more ‘rights’ over the property because she owns it fully? Could she leave it to others in her will for instance? Has this current situation meant that when the property is disposed of there will be way more capital gains tax being deducted? Lastly, is there ever a situation whereby a deed of variation can be revoked or amended? Many thanks again0 -
A DOV can be done at any time it only needs to be done within 2 years to benefit from the tax breaks.0
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The wife owns the property so she can sell it anytime she likes, or leave it in her will to whoever she likes.earlycomputers wrote: »Many thanks again for your thorough reply - that’s very helpful. So to sum up, would my father’s wife have more ‘rights’ over the property because she owns it fully? Could she leave it to others in her will for instance? Has this current situation meant that when the property is disposed of there will be way more capital gains tax being deducted? Lastly, is there ever a situation whereby a deed of variation can be revoked or amended? Many thanks again
What she has to do at some point is pay back the loan (2nd Charge) to you, but you are not in control of the timetable for that, the wife is.
You would need to take advice as to your tax situation when the loan is paid back. You effectively have an interest worth 44.05% of the property value but have to pay back all of the mortgage interest the wife has incurred, you may or may not be able to set one off against the other.0 -
earlycomputers wrote: »When I signed this deed of variation I had no knowledge of the implications of this deed which effectively wrote myself and my brother out of my father's estate (contrary to what he specified in the will). I was an idiot to sign it not fully understanding the implications.
Did you receive independent legal advice about the implications of the document that you signed? If so, then you might have a case against the solicitor who failed to explain what was going on to you. If not, then the "instrument of variation" can quite easily be set aside: one fundamental condition for varying a will is that the person who is disadvantaged receives independent legal advice before signing.0
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