I am dealing with an intestacy where the deceased ran an agricultural contracting business. The deceased’s nephew has continued to run the business and the statutory beneficiaries are all in agreement that the nephew should have the business. I am planning to do a Deed of Variation to incorporate a notional Will leaving the business to the nephew but it has been more than two years since death. However there was no IHT payable by the estate and there have been no capital gains. The business assets are plant and machinery which have depreciated in value. In the circumstances I therefore think a Deed of Variation can be done to give effect to the family’s wishes but would appreciate other member’s opinions.
A deed of variation is a gift that complies with statute so as to create a legal fiction for IHT and CGT purposes – that the gift was made from the estate of a deceased person. In all other respects, it is an ordinary gift.
Once you cannot comply with statute – here the time limit has expired – you are left simply with a gift. So I would recommend against trying to present this as a deed of variation and instead let the transfer documents show this for the gift that it actually is.
Surely that is the most straight forward approach for everyone?
As over 2 years have passed since the death, those now entitled to the estate may be able to claim business property relief, which. Provided they all survive 7 years, this should not give rise to any IHT issuers. If any die within 7 years, the business assets will need to still be qualifying assets at the date of their death.
Al that would be required to give effect to the intention would be a deed of gift from the other beneficiaries to the nephew. The use of a “deed of variation” has potential to cause confusion as the classic elements of such a document – the declaration under s. 142 IHTA 1984 and s.62(6) TCGA 1992 – will not be there.
As a side issue, I would be wary of using the mechanism of creating a notional will in and deed of variation, rather than just setting out the specific gifts intended. The use of the notional will route can often create unforeseen problems.