Correction of IPDI Created by Short-Term Right of Occupation - Advice Please

Hi All,

I am working on an estate where the Will left a six month right of residence of her property.

The beneficiary of the right of residence has not lived in the property after the date of death, but I understand that from HMRC’s perspective if he dies within seven years and six months of the testatrix’s death that he may be deemed to make a PET.

In a bid to mitigate against the above, I am looking at preparing a Deed of Disclaimer, for the beneficiary to disclaim his right to reside in the property.

If a Deed of Disclaimer is prepared, albeit outside the six-month period, free of charge by the solicitors acting in the estate administration, would the beneficiary be deemed to have received consideration for the preparation of the Deed such that HMRC might deem it to be ineffective?

It does not seem appropriate to ask the beneficiary to instruct his own solicitor to prepare the documentation…

If anyone has any thoughts that may clarify the above, they would be gratefully received!

Thanks,
Helen

HMRC has previously asserted that a disclaimer needs to be made whilst the benefit being disclaimed is a “benefit” at the time of the disclaimer. As the 6 month period has expired, HMRC might decline to accept the disclaimer.

Mindful that a beneficiary might disclaim by conduct, perhaps the executors might minute that the beneficiary in question did not take up the right to occupy and is therefore considered to have disclaimed by their conduct. If there were any exchanges between any of the executors and the beneficiary in support of that, these might be referenced within the minute (mindful that it may be necessary to provide a copy to HMRC at some time in the future).

With regard to the comment “It does not seem appropriate to ask the beneficiary to instruct his own solicitor to prepare the documentation”, surely it is in the beneficiary’s interest to disclaim otherwise their nil rate band may be wholly, or substantially lost to their estate should they die within 7 years of the IPDI terminating.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals