Our client’s husband has recently died, with a will that leaves all his assets to her. The estate consists of a joint tenancy property with wife (which of course passes by survivorship anyway) worth around 800k and not much else.
Wife would like to vary the will to leave a percentage of the property to her children (she is young, so the gifted share of property may well increase beyond the NRB eaten up by the gift). Estate likely to be significantly larger at her death as she is in her early 50s in good health.
Can the will be varied to leave, say, half the property to her children and the joint tenancy severed at the same time?
I understand that a retrospective severance can be effected in certain circumstances, but am unsure about both of these actions together being valid. Is the issue here that the variation(s) is creating an occasion that but for the variation would be a GROB and therefore not permitted?
Yes a deed of variation can be used to gift all or part of the share of the joint property inherited by the widow, so as to be treated as though it was a gift by the deceased upon his death.
This is a fairly routine occurrence.
There can be no retrospective severance, though and the property will remain outside of the deceased’s estate in fact, only being included therein for the purposes of the IHT fiction.
Provided that the provisions of s.142 IHTA 1984 apply to the variation there is no reservation of interest, or POAT liability, as the gift is deemed for IHT purposes as being made by the deceased.
In the circumstances described, if the variation is made then that will (I think) use up the residence nil rate band of the deceased in priority to the general nil rate band. That may be disadvantageous, because the residence nil rate band is due to increase over the next few years whereas the general nil rate band is not. That increase will be lost to the widow’s estate.