I have a question regarding a deed of variation entered into by the beneficiaries of an estate I am administering.
The property in question was the deceased’s residential property which was left to a lay beneficiary for 15 odd years and then to charities as remaindermen. The asset was administered and the beneficiary took possession and has derived rental income for the last 14 months from the property. The beneficiaries have now agreed a variation where the original will clause would be replaced to simply allow for a sale of the property with a distribution in various proportions to all the beneficiaries.
The problem I am having is that the deed was entered into 2 days before the 2 years runs out and I am receiving conflicting views on whether the rental income received by the beneficiary for the last 14 years is accountable to the estate or not. The solicitor (acting for the charities) who drafted the deed says no as he would have otherwise have made an express provision in the deed to state that the will should be read back to date of death if he intended on the rental income to be accounted for. He said it was his and the charities intention that the life tenant can keep the rental income.
I thought that nature of the deed of a variation was to be read back to date of death? Can anyone confirm what the correct position is and if they know any law to back any response?
Do you mean the property was put in trust for a period of 15 years following the death of the original owner and that life-tenant has now died or has someone else died?
The dispositions of a deed are effective from the date of the deed - Waddington v. O’Callaghan, 1931.
A deed of variation is a deed of gift which is deemed to apply retrospectively only for IHT and some CGT purposes, provided the appropriate declarations are included within the deed.
If a variation is intended to include income arising on the specified assets before the date of the deed, the gift must include a disposition of that income. This is often achieved by stating that the variation is effective from the date of death of the deceased. If a deed merely makes a gift of the underlying asset(s), it is only any income (and/or liabilities) arising after the date of the deed that pass to the new beneficiaries. Although, mindful that the need for apportionment was abolished by the Trusts (Capital and Income) Act 2013, if the variation was made after the Act became effective, all income received after the date of the variation, regardless of its due date, would be due to the capital beneficiaries entitled under the deed in proportion to their capital entitlements.
In the case in question, it is not clear what the period of 14 years refers. At first read, it sounds as though the variation was made many years, but the beneficiary has continued to receive the income, but is that really the case.