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LPC Law Notes > Private Client Notes
This is an extract of our Post Death Arrangements & Precatory Trusts document, which we sell as part of our Private Client Notes collection written by the top tier of Cambridge And Oxilp And College Of Law students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Private Client Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Post death arrangements and precatory trusts 2015 1) Writing back provisions
- Variation of a will
What is it?
A direction from a beneficiary, to the PRs to transfer property that the beneficiary is entitled to under the will or intestacy, to another person
Considerations for variations
1) A variation is possible after acceptance
2) A variation can be made in respect of part of an inherited gift
3) The original beneficiary controls destination of property
Requirements for a variation
1) The variation must be in writing - s.142(1) IHTA
2) The variation must be made within 2 years of the deceased's death - s.142(1) IHTA
3) It must not be made for consideration in money or money's worth - s.142(3)
4) The instrument in writing making the variation must contain a statement from the beneficiary that they intend s.142(1) IHTA to apply to the variation
a) Where the variation results in extra tax being payable the PRs must also make such a statement.
b) The PRs can only refer to make the statement if insufficient assets are held by them to discharge the additional tax - s.142(2) IHTA 5) If additional tax is payable, a copy of the instrument must be delivered by the PRs to HMRC
IHT consequences of a variation
Normally a? This would be deemed a gift (PET) by the beneficiary to the new recipient
s.142 satisfied a? The transfer will be read back to the date of death and inheritance tax will be payable on the death estate as if the deceased had left his property to the new beneficiary
CGT consequences of a variation
Normally a? This would be deemed a disposal and could give rise to a CGT liability for the original beneficiary
s.62(6) Taxation of Chargeable Gains Act 1992 (same conditions as under s.142 IHTA) satisfied a?
The variation will not be treated as a disposal and the variation will be read back to the date of death. There is no CGT on death
2) Writing back provisions - Disclaimers
Income tax consequences of a variation
s.142 IHTA / s.62(6) TCGA satisfied a? Income received by the original beneficiary before the variation was made will be taxed as part of their income
What is it?
A disclaimer is a refusal to accept property to which a beneficiary is entitled either under the intestacy rules or under the terms of a will
Considerations for disclaimers
1) A beneficiary can only disclaim before acceptance
2) A beneficiary can only disclaim the whole gift
3) A disclaimer of rights under a will does not act as a disclaimer of intestacy rights
4) The property passes as if the gift to the original beneficiary had failed
IHT consequences of a variation
The transfer will be read back to the date of death and inheritance tax will be payable on the death estate as if the deceased had left his property to the new beneficiary - s.142(1)
CGT consequences of a variation
The variation will not be treated as a disposal and the variation will be read back to the date of death. There is no CGT on death. - s.62(6) TCGA
Income tax consequences of a variation
The original beneficiary will not be liable to income tax as a disclaimer can only be made where the gift was not accepted
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