Does a Deed of Variation to a will and IIP trust change the “direct descendants” for IHT435?

[rjhfandclf]

A deed of variation (DoV) was made to a will that changed the ultimate beneficiaries of an IIP trust from the sons of the deceased to their own children (i.e. the deceased’s grandchildren). The lifetime beneficiary was the sons' step-mother.

The DoV was created in 1987 within the two years time limit following grant of probate, and per a contained schedule was produced by their solicitors to “The Board of Inland Revenue” in that the parties jointly elected that “the terms of Section 142 of the Inheritance Tax Act 1984 and Section 49 (6) Capital Gains Act 1979 shall apply”.

The lifetime beneficiary of the IIP has now died, and her executors have raised a couple of queries.

1. We are not entirely sure what the implications are of the schedule re Inland Revenue, if anything now.

2. Does the substitution of the grandchildren via the DoV mean that the executors should insert their names as step-grandchildren in the “direct descendants” box 8 of IHT435 in lieu of the originally named sons per the original will?

Thank you.

[AGoodman]

The effect of the variation is that, for the purposes of IHT (and CGT), the trusts are treated as having appeared in the will in the varied form. At the time a DoV wasn't valid for IHT unless notice had been given to HMRC.

Yes, the logical conclusion is that the step grandchildren are named in Box 8

[rjhfandclf]

Thank you for your confirmation of the position - appreciated. Will pass on to executors.