How does a deed of variation affect inheritance tax?
How does a deed of variation affect inheritance tax?
The use of a Deed of Variation means that the moving of assets carries with it the ability to better plan tax to reduce a person’s tax liability. The legislation permits the original beneficiary, specifically for tax purposes, to elect a new beneficiary.
Does an executor have to be party to a Deed of variation?
The beneficiary who is redirecting his/her entitlement must sign the deed of variation. The executors are only required to be party to the deed if the variation results in more tax becoming payable.
Is a Deed of variation a potentially exempt transfer?
Note that if the Deed of Variation does not comply with the statutory formalities, it is viewed as a Potentially Exempt Transfer for Inheritance Tax and Capital Gains tax purposes.
Who can benefit from a deed of variation?
A Deed of Variation allows a beneficiary of an estate to redirect their entitlement from that estate to another person, without them suffering any tax implications. The variation is effectively written back into the Will or the Intestacy Rules, as if the gift to the nominated person had been made by the deceased.
How does a deed of variation work for inheritance tax?
For inheritance tax (IHT) purposes, a deed of variation, on the face of it, amounts to a transfer of value by the original beneficiary. However, providing you meet four conditions (detailed below*), the transfer is treated as though the deceased made it (according to Section 142 of the Inheritance Tax Act 1984).
Can a deed of variation be used to redirect property?
You can still make a variation where the original beneficiary has already taken the property from the estate. However, the variation can only redirect the asset in question once. It is important to note that a deed of variation does not work for income tax or stamp duty land tax purposes.
Can a leaseholder apply for a variation deed?
The leaseholder can apply to their landlord to remove or lessen this restriction and the variation deed provides a legal framework to record the particular changes both parties have agreed. There are a large number of uses to which a variation deed can be put for a leaseholder when crafted by a specialist conveyancing solicitor.
When to change a deed when you inherit property?
Namely, deeds. Legally, a deed needs to be changed when you inherit property to reflect your new ownership. And in some cases, a legal representative or executor will likely have that responsibility. But what happens when property winds up in probate?
For inheritance tax (IHT) purposes, a deed of variation, on the face of it, amounts to a transfer of value by the original beneficiary. However, providing you meet four conditions (detailed below*), the transfer is treated as though the deceased made it (according to Section 142 of the Inheritance Tax Act 1984).
You can still make a variation where the original beneficiary has already taken the property from the estate. However, the variation can only redirect the asset in question once. It is important to note that a deed of variation does not work for income tax or stamp duty land tax purposes.
How does a variation in estate law work?
A variation works by allowing the beneficiary to rearrange or redirect the interest that came to them originally from the deceased’s estate. In effect, the beneficiary is transferring to another beneficiary some or all of the interest they have inherited.
Do you have to include statement of intent in deed of variation?
If the redirection increases the amount of tax due on death the personal representatives must join in. It must not be made for any consideration in money or money’s worth. It must include a statement of intent for tax purposes. We will look at the above requirements in more detail in the remainder of this article.