Hi if an estate holds shares that qualify for BPR, grant of probate has been obtained and the shares have been sold and the cash distributed to four residuary beneficiaries, and one of the residuary beneficiaries wants to redirect her share in terms of a Deed of Variation within two years of death to a Discretionary Trust, will the cash that is redirected still fall within the BPR exemption.
Many thanks.
Michelle
I would suggest the cash assets would not quailify for BPR.
The shares ought to have been settled to a DT prior to the sale taking place.
Richard C. Bishop
Hi Richard
Thank you.
Michelle
A variation is still possible but as regards BPR pointless. BPR is due to the estate and has already had the effect of reducing IHT on the estate. The variation does not secure any additional BPR.
If a quarter of the BPR asset was now varied into a DT it would have the effect, if reading back were elected for both IHT and CGT, that the trustees rather than the PRs had sold the quarter share in the asset. There is no effect on the BPR due to the estate and the trustees will not only have failed to own it for another 2 years to qualify as BPR property but have actually sold it anyway! It is possible that the CGT liability of the trustees may be less than that of the beneficiary as trustees pay a flat rate of 20% whereas the beneficiary may pay at a higher rate, though may have more annual exemption and perhaps losses.
What the variation would do is channel the net cash into a DT without the beneficiary making a chargeable transfer for IHT. And as long as the will did not make other gifts in trust could give the DT a full NRB for future IHT chargeable events.
Whether the professional costs of the advice and drafting that outweigh the benefit is fact dependent.
Jack Harper
Hi Jack
Thanks so much. That has given me a clearer understanding that is very helpful.
Best
Michelle