Deed of Variation

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Mother died Nov 06 leaving all to father who died Dec 06 with estate to go to 2 sons.Father's house always in his name. Can Deed of Variation be done to split house in tenants in common with father's estate owning 50% & mother's 50% so that Deed of V can then be done on mother's will so her 50% goes direct to the sons thus using nil rate band with overall result of reducing tax?

[Peter D]

It is not a case of tenants in common but establishing a 'Deed of Trust' so the entire estate, everything was shared 50/50 no matter what name was on the ownership any the asset This clears the way for a NRB Discretionary Trust thus moving the NRB applicable out of Fathers estate. However I am unsure as to whether this is possible as the property was not in any way in Mothers name. What were the asset vluse i.e. the house and the moveable estates of each parent. Regards Peter

[Peter D]

Although I was intending to have the evening off I have given this more though and without reference to legal council on this I fear that a Deed of Trust can be established as neither party are alive to agree to it, If the property had been joint then a TinC would have, and I have instructed that on many occassions, worked to stop the automatic transfer of the property to the surviving spouse then NRB DT the value, but I have not had this situation I know my Lawyer is away as of this evening as it is a May bank holiday. You need to seek the assistance of well versed and experienced IHT Practitioner. Where do you live. How much moveable asset did Mum have, accounts savings ISA's everthing in her name and 1/2 that was in joint names. What was declared at probate. ?? Regards Peter

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Thanks,Peter.Mother had joint a/c with father with 130k which passed to him.His estate 130k + house 250k + chattles 5k to total 385k-on face of it 40k iht.Mother's will can be varied to pass her half share using NRB. I wonder if she had an equitable interest in house under MWPA (house owned that long!)so could also pass that half share. Even so cannot father's estate pass a share to mother's estate?
Appreciate you burning midnight oil! I live in Southampton.
Regards,Arrow.

[draftsmann]

What is required here is a "double death" variation.

Under section 142(1) of the IHTA 1984, an interest in a deceased's estate can be varied whether the interest arises by will, intestacy or "otherwise". It is accepted that "otherwise" includes the rights of the surviving joint tenant.

The bad news here is that your mother was not a joint owner of the house. The deeming provisions of section 142(1) do not extend as far as rewriting history to place into someone's hands that which was never there!

The good news is that it may be possible to do something with the joint account. A posthumous 50:50 severance would not attract much concern from the Revenue. This would save 40% of £65k. More aggressively, the severance could (in theory at least) be made to be unequal, in your mother's favour, so as to bring your father's estate down to the IHT threshold.

We would be willing to help with this. I am working from my overseas office for the next few days but will be in Hants in a week's time.

The documentation in a case like this will be quite complex, and I would need to have it settled by Counsel, so the exercise would not be inexpensive - but it would at least result in some net saving of tax.

Adrian Sacco
The Trust Shop
adrian@thetrustshop.com

[Peter D]

The joint account is going to be the easiest route or were there some other sole named assets like an ISA or two, post office book premium bonds. Check carefully. If not then Adrian sounds like your man and an unequal share may go through however Father died in Dec 06 so the NRB was £285K and you are trying to sever the joint account 30/100. Regards Peter

[Geoff D]

The simple answer is that a deed of variation can be executed by the personal representatives of your late father's estate who effectively "step into" his shoes to sign the DOV. A nil rate band discretionary trust is unnecessary - just bequeath the nil rate band legacy to someone other than the surviving spouse to maximise its use. You can sever joint ownership of home and accounts retrospectively.

[draftsmann]

With respect to Geoff D, the problem here is that there was no joint ownership of the home to sever. Reading between the lines it appears that the OP's mother may have had very few assets in her own name. The planning would have been easier had Dad died first, but this is not a very "simple" case in my opinion.

Also, while I agree that a simple gift of Mum's estate (which appears to be below the NRB in any event) would solve the immediate problem, I would strongly recommend establishing a discretionary trust, as this avoids exacerbating the IHT exposure of the OP and his siblings (if any). With the changes made to the IHT rules in the Finance Act 2006 taxpayers should where possible take advantage of any opportunity to establish "mini" discretionary trusts as they are one of the few remaining relatively simple IHT planning tools.

Adrian