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Inheritance Tax & Deeds of Variation

Inheritance Tax is a tax on gifting on death or within seven years of death or on gifting into a trust.

You should be aware that the scenarios described in this article notes do not cover all possible inheritance tax planning issues and you should seek our specific advice in relation to your particular circumstances.

If you’ve been left something in a Will, but want to pass this on to someone else, a deed of variation will protect your tax position.   If you were to die within seven years of redirecting the gift to someone else without a deed of variation your estate could be liable to pay unnecessary inheritance tax.   A deed of variation that follows statutory rules can save your family inheritance tax.

Post Death Tax Planning – how it works

Renunciation of gifts by recipients can be effected tax efficiently by use of deeds of variation.  This works where a beneficiary who has been left a gift wishes it to go to another person without the beneficiary exposing their own estate to an additional tax charge if they fail to survive seven years.  This can assist the passing of trading business assets to the next generation or the advancing of assets to children on the first death if a Will has not made such provision. 

A deed of variation redirection scheme is an option providing there are assets in the deceased’s estate to vary.   If a variation scheme is contemplated then ideally assets should be held in sole names and property held as tenants in common rather than joint tenants (see our notes on Joint Tenants or Tenants in Common) .  The purpose of holding assets in sole names and property as tenants in common is so assets do not pass automatically outside the Will potentially making a variation scheme more difficult.  This is particularly true if investment properties are held as joint tenants as capital gains tax difficulties can arise in determining which half (the deceased’s or the surviving spouse?) is being redirected to the children. 

If however couples have, or accept it is likely they will have, assets of a total combined value of less than £650,000 at the date of the second death then there may not be tax reasons to vary.

Future Law

The information contained in this article is relevant to the date upon which it is distributed; advice given verbally by Wilson Nesbitt is also only relevant to the day upon which it is given.  Tax laws change every year and it is the individual responsibility of each Wilson Nesbitt client to ensure that their Will reflects the current legal and tax position.  Wilson Nesbitt cannot and do not give any assurance whatsoever that the legal and tax position at the date of death of a client will be the same as at the date advices are given or Wills are executed. 

Gilbert Nesbitt & Lenore Rice

Gilbert and Lenore are senior partners of Wilson Nesbitt, solicitors.  Gilbert has been a solicitor since 1978 and a partner in the firm since 1982.  Gilbert has been a member of the Society of Trusts and Estate Practitioners since shortly after it’s foundation in the 1990s. Lenore has been a solicitor since 2009, a partner in Wilson Nesbitt since 2012 and a member of the Society of Trusts and Estate Practitioners for the last ten years.  They share responsibility for the tax, trust, wills and estate administration department of Wilson Nesbitt assisted by six specialists.  Either Gilbert or Lenore are happy to have a phone or video call or meet clients face to face (behind Perspex screens)  to discuss Inheritance Tax, complex Will planning or other matters in either our Belfast or Bangor offices.    

POSTAL WILL OR ENDURING POWER OF ATTORNEY MAKING

We provide you with a free postal information pack on how to make your Wills and Enduring Powers of Attorney by completing and returning a questionnaire to us, receiving draft Wills and Enduring Powers of Attorney from us for you to review, using our phone helpline and then receiving you are ready to sign Will & Enduring Power of Attorney with instructions on how to sign the documents in accordance with the legal requirements.

CONTACT US

Take the next step and call us on freephone number 0800 840 9293 or email Wills@Wilson-nesbitt.co.uk to request a free postal Wills & Enduring Powers of Attorney information pack on how you can use our postal service at little cost to make your Wills, make your Enduring Power of Attorney, gift transfer your property or arrange a phone or video call or face to face (behind Perspex screens) consultation with one of our solicitors on making your Will, Inheritance Tax planning, gifting or other tax planning matters.

See our other articles on Inheritance Tax, Making your Will or Enduring Power of Attorney:-

Get in touch

To find out more about how we can help you with your query, please contact us.