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Where Taxpayers and Advisers Meet

Question on deed of variation

riccardob
Posts: 92
Joined: Sun May 29, 2011 10:02 am

Question on deed of variation

Postby riccardob » Mon Jan 30, 2012 9:19 pm

Hi,

I was going to ask this on the domicile thread but I notice that the dom thread has not gone slightly off topic.

I have a couple of questions on the concept of deed of variation.

a) Does a deed of variation avoid IHT on a deceased estate if person A inherits from person B (brother) and person A then directs proceeds
to person C (son of A). Does person C have to pay IHT on A's estate if A dies within seven years or is the seven year rule not relevant withing a deed of variation.

b) Can a deed of variation cover the proceeds of a non dom person who has died interstate?

c) can a deed of variation be drafted by person C on behalf of person A via power of attorney should person A be incapacitated.

many thanks for your patience.

maths
Posts: 7641
Joined: Wed Aug 06, 2008 3:25 pm

Re: Question on deed of variation

Postby maths » Mon Jan 30, 2012 10:54 pm

a) Does a deed of variation avoid IHT on a deceased estate if person A inherits from person B (brother) and person A then directs proceeds
to person C (son of A).


No; the IHT on the estate remains the same.
Does person C have to pay IHT on A's estate if A dies within seven years or is the seven year rule not relevant withing a deed of variation.
No. The gift by A to C is deemed to be made by B (in effect under B's will). There is no PET by A.
b) Can a deed of variation cover the proceeds of a non dom person who has died interstate?
Yes.
c) can a deed of variation be drafted by person C on behalf of person A via power of attorney should person A be incapacitated.
In general, no.

riccardob
Posts: 92
Joined: Sun May 29, 2011 10:02 am

Re: Question on deed of variation

Postby riccardob » Tue Jan 31, 2012 7:29 pm

thanks maths. How come a POA cannot be used for deed of variation purposes?

servogleba
Posts: 5
Joined: Fri Feb 03, 2012 7:58 pm

Re: Question on deed of variation

Postby servogleba » Fri Feb 03, 2012 8:00 pm

The response given by maths is incorrect.
A POA is perfectly valid for deed of variation purposes.
A deed of variation can therefore be drafted by a person under a power of attorney.

maths
Posts: 7641
Joined: Wed Aug 06, 2008 3:25 pm

Re: Question on deed of variation

Postby maths » Fri Feb 03, 2012 10:11 pm

I am always willing to learn.

servogleba, what is your authority for your statement ?

servogleba
Posts: 5
Joined: Fri Feb 03, 2012 7:58 pm

Re: Question on deed of variation

Postby servogleba » Sat Feb 04, 2012 7:18 pm

We have used a poa to produce a DOV and it was for an estate higher than the threshold.

What evidence do you have?

maths
Posts: 7641
Joined: Wed Aug 06, 2008 3:25 pm

Re: Question on deed of variation

Postby maths » Sun Feb 05, 2012 8:39 pm

We have used a poa to produce a DOV and it was for an estate higher than the threshold.
With respect, this is not an authority for your earlier statement
What evidence do you have?
My earlier answer namely "In general, no" is correct albeit perhaps incomplete.

In general the donee of an enduring power is not able to effect DoVs on behalf of the donor. This may only be done if the conditions laid down in MCA 2005 Sch 3 paras (2) and (3) are satisfied.

pqtaxation
Posts: 353
Joined: Wed Aug 06, 2008 3:38 pm

Re: Question on deed of variation

Postby pqtaxation » Mon Feb 06, 2012 12:21 am

Could it just be that maths is thinking only of POA's (LPA or EPA its predecessor) subject to Mental Capacity Act whereas servogleba is referring to a POA granted by a competent person specifically for the purpose of executing a DoV?

riccardob
Posts: 92
Joined: Sun May 29, 2011 10:02 am

Re: Question on deed of variation

Postby riccardob » Mon Feb 06, 2012 11:17 pm

The plot thickens.

I have looked for the sections mentiond by maths in here http://www.legislation.gov.uk/ukpga/2005/9/contents
but I cannot find anything that relates to a POA situation.

I would be grateful if the paragraphs Maths has specified coule be copied here or a link provided.

many thanks

maths
Posts: 7641
Joined: Wed Aug 06, 2008 3:25 pm

Re: Question on deed of variation

Postby maths » Tue Feb 07, 2012 3:42 pm

In a sense a DoV is a fiction created for IHT and (limited CGT) purposes.

However, the reality is that a DoV is simply a "gift" made by the "original" beneficiary to another person.

The references to which I referred in my earlier posting refer to the rules re a donee under a PoA having the right to effect gifts which I would suggest covers a DoV.

Maybe servogleba could add his views.


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