Deed of Variation - Beneficiary Resident in Spain

I am dealing with a fairly simple estate, but where one of the residuary beneficiaries is resident in Spain. It appears that the Spanish authorities have fairly stringent requirements, demanding legalised copies of the Will, estate accounts etc. It has been suggested that this beneficiary enters into a deed of variation to place her share of the estate (well below the NRB) into a discretionary trust to benefit her and her children with her brother here in the UK (and his wife) as the Trustees.

Is there a reason why this would not work? Do the Spanish authorities need to be told of a deed of variation?

Many thanks in advance for your replies.

Damian Lines
Rubin Lewis O’Brien

Whilst the beneficiary may enter into a deed of variation, as suggested, there may be unexpected consequences.

As the execution of a deed of variation means the beneficiary must have accepted their legacy, will the gifting of that legacy to a third party, whether individuals or trustees, negate any duty to disclose information to the Spanish tax authorities?

I suspect not, but suggest the beneficiary consult with an appropriate adviser in Spain to establish the position.

Paul Saunders

There is no reason why the non-UK resident beneficiary cannot enter into a DoV assuming the personal law of such beneficiary (not the testator) does not for some reason prevent him/her from varying a will.

Fo income tax and CGT the beneficiary will be the settlor of the trust but despite falling in the class of potential beneficiaries the reservation of benefit provisions are not in point.

If the beneficiary is not UK domiciled and one or more of the assets comprised in the residuary gift are non-UK situs (or capable of becoming so prior to settlement) excluded property status should apply to the trust assets. In such a case non-UK resident trustees might be considered instead.

Unlike the position with respect to a disclaimer (as Paul points out) the beneficiary has accepted the inheritance which may mean on giving it away (whether by DoV or otherwise), prima facie, possible Spanish tax consequences may arise.

Malcolm Finney

I agree with Malcolm, the deed of variation should mean in any case the acceptance of the estate and that should trigger diverse tax obligations related to, at least, inheritance tax and maybe declaration of assets in foreign countries (the infamous model 720) .

The tax authorities here try hard to fit any decision related to wills and estates which does not exactly reflects the starting position-i.e. a pact of heirs to distribute the assets in a different manner- either as a capital gain in the personal income tax or a donation, both obviously taxable.

Jose Garriga

By “simple estate”, I take it that you mean that there is no trust or will trust established by the will after administration?

Peter Harris