Deed of Variation or appropriation - subject to tax

[Jan L]

My brother and I are the only beneficiaries under my mothers estate and have an equal share of the residue which includes 2 houses. We would like to take one each but there is insufficient cash in the estate to pay the IHT so we can only take them subject to tax. As I am the sole executor I would like a charge from my brother to cover the tax. We have also agreed that we will share the IHT equally even thought one house is valued at slightly more than the other. Is it possible to do this by way of deed of variation or would the obligation to pay IHT and/or the charge be regarded as consideration so that the IHT/CGT/SDLT reliefs might not be available. Would it be better if we appropriated the properties, again subject to tax and a charge? Any thoughts would be appreciated.

[Lee Young]

IHT is payable out of the estate. Therefore if you are equal beneficiaries you will in effect bear the burden of that tax equally.

If you as executor pay out the estate before the tax is fully paid then you should ensure there is a mechanism in place to compel the payment of the future tax from your brother. If he doesn't pay, you will have to.

Not sure a deed of variation gets you anywhere unless you are changing the split of the assets in the estate, in which case yes the reference to "subject to tax" can be made, but this still does not change any of the above. HMRC does not care who may be liable to pay the tax from the assets - it is the job of the executor to pay it, and it is the executor who will be pursued by HMRC if it is not paid.