Deed of Variation and benefits

[Katherine]

I have a question in relation to an elderly gentleman who has now died. He was in receipt of benefits and lived in council accommodation. A few years before he died he inherited approx £35k from his late sister. He completed a deed of variation redistributing the estate of his late sister to his niece in order not to affect the benefits he received. Is this legal and do the executors of his will now have to declare it to the DWP or Inland revenue?

[Lee Young]

If it was requireda t the time the Rvenue would have seen the varaiotn shortly after it was signed.

If the DWP do not ask, do not tell them. However it would be classed as a gift by the elderly gentleman. If the DWP ask about gifts you must reveal the terms of the variation, as it may be deemed to be deliberate deprivation.

[Katherine]

Hi Lee
The Revenue would have only seen the deed if it was sent in with an IHT200. Also when you complete a Deed of V it is deemed to be a gift from the estate of the testator rather than the original beneficiary completing the deed (i.e. the old gentlemen). What I am trying to find out is if the executor ought to declare it as they would have to declare gifts not covered by annual exemptions etc. If a person completes a Deed of V to save Inheritance tax etc then it is not normally a concern to the Revenue. However if someone is in receipt of benefits and specifically does one to “fiddle” the system is that legal and should it not be voluntarily declared, especially since the DWP will no doubt be contacting the executor in relation to another matter and will be asking for details of the deceased’s assets. It is not always enough to simply not volunteer information if the executor has reason to believe that it is something the Revenue/DWP should be aware of as it could come back and bite the executor in the ass.

[Lee Young]

If the deed were done some years ago then the old rules were that you had to submit it to the Capital Taxes Office and the deceased's own income tax office for confirmation that the claim to s142 and s66 applyng had succeeded.

Moreover the writing back provisins apply for IHT and CGT only. for all other purposes, ie income tax, benefits, the gift is made by the beneficiairy not the deceased.

The gift is not declarable by the executor for IHT purposes in the estate, but may be declarable if asked for benefits purposes.