Post Death Arrangments - Private Client

• S.144 IHTA 1984: if property is left on discretionary trust and an appointment, which would have led to an IHT charge, is made within 2 years, there is no exit charge on the appointment and instead the appointment is, in effect, read back into the will.

• Advantages:

  • Effective two-year survivorship period available

  • No consents required

  • No election required (although it is usual to include an express election)

• If a beneficiary does accept a gift, they are free to dispose of that property as they think fit – they can vary entitlement to that property (at any time).

• BUT if the property is accepted and then re-routed, there could be adverse tax consequences:

  • PET for IHT purposes, so if they die within 7 years, it will eat into NRB

  • Disposal for CGT, so if the asset has increased in value since death, there could be an immediate charge to CGT

Inheritance Tax – s.142(1) IHTA 1984

Where within two years after a person’s death, any of the dispositions of the deceased’s estate are varied or disclaimed in writing, they shall be read back and treated as though the variation had been effected by the deceased, or in the case of disclaimer, as though the gift had never been conferred.

Capital Gains Tax – s.62(6) TCGA 1992

Similar provisions apply for CGT – effect:

• It will not be treated as a disposal by the variator.

• Shall apply as if the variation had been effected by the deceased, or in the case of disclaimer, as though the gift had never been conferred.