Deed of variation where a beneficiary dies

by **pwjsmith** on Mon Oct 24, 2011 4:01 pm

My wife lost her father some years ago and her mother earlier this year. Her mother was intestate, so she and her brother (only children) dealt with the estate. The estate included a house, but the value was less than the threshold for inheritance tax. A grant of representation was given to her and her brother as joint executors. To date the house is still registered to her mother.

Unfortunately her brother passed away a few weeks ago also intestate. He has no dependants (wife/children) and now my wife has to deal with his estate in addition. His estate will be over the inheritance tax threshold due to a second property. So far no application for a grant of representation has been made for his estate while we try to value it.

My question is whether half of his mother's estate (i.e. the house) should be considered in his estate, even though it had not been transferred? Assuming it should would it be possible for my wife to make a deed of variation to her mother's estate to essentially leave it all to her and therefore not be included in part in her brother's estate, ie saving a considerable amount of inheritance tax?

From the reading I have done it appears that all beneficiaries must agree to a variation and it must be enacted by all representatives, but in this case her brother (a beneficiary and representative) has died.

What can my wife do to avoid the inheritance tax on her brother's share of her mother's estate (if indeed it is due)? It seems so unfair that she would have to sell her family home of 50 years in order to pay tax, after loosing her whole family! What would be the typical fee charged by a solicitor to resolve this particular issue?

You views before engaging a solicitor are much appreciated.

by **Lee Young** on Mon Oct 24, 2011 4:43 pm

The simple answer is yes a deed of variation can be done in these circumstances, though there are one or two caveats that the solicitor will need to cover off.

Your wife, as administrator of her brother's estate, will be the one who can do the deed of variation of her mother's estate on behalf of her late brother.

If I were the solicitor engaged for this kind of work my fee would be in the region of £400-500 plus VAT for the deed of variation work and associated advice. Fees will of course vary depending on geography and expertise.

by **pwjsmith** on Mon Oct 24, 2011 4:53 pm

Hi Lee,

Thanks for the quick reply. Can the variation be done BEFORE applying for a grant of representation on her brother's estate? ie. is his death certificate enough to do it, or do we have to go through the process of obtaining a grant of representation on his estate (and I assume paying the inheritance tax) and then trying to claim some of the tax back afterwards?

How long does it normally take and what information (pieces of paper) is required?

Many thanks, Paul.

by **Lee Young** on Mon Oct 24, 2011 8:32 pm

Technically the administrators do not have authority in the estate until they are appointed by the grant so I think the strict answer is that they can not do the deed until the grant is issued. However that said, I dont think even the Revenue would take the point. I would therefore say the deed of variation would be dated at the same time as the grant application.

The solicitor would need all the paperwork in relation to the first estate and instructions re the variation. It shouldnt take more than 3-4 weeks to complete.

by **pwjsmith** on Mon Oct 24, 2011 8:57 pm

Thanks again Lee.

We have the PA1 from the first estate, but since it fell below the IHT threshold there are no values on it. I called HMRC today to ask for a copy of the IHT205 but they are unable to give that and unwilling to give the amounts stated on it, so not very helpful.

I don't believe there is any other paperwork, other than the Grant.

What paperwork wrt the first estate do you have in mind?

by **Lee Young** on Mon Oct 24, 2011 9:32 pm

I would need a copy of the grant and death certificate, and it would be helpful to know what was in the estate.

by **pwjsmith** on Mon Oct 24, 2011 10:43 pm

That's great - thanks Lee!

by **carlo** on Wed Mar 07, 2012 10:32 am

I'm aware of all the details in this issue, and i'd like to ask you. Within how many years does the deed of variation must be effected to be effective for inheritance tax purposes? Thanks in advance.