Deed of Variation by Trustees

We are dealing with an Estate where the residue is left on a discretionary trust with the class of beneficiaries being the deceased’s brother’s grandchildren and further descendants.

There is an opportunity to reduce the Estate’s IHT liability by increasing cash gifts to charities.

Are the Trustees able to execute a Deed of Variation to re-direct part of the residuary estate to charity to trigger the 36% rate? The terms of the trust do not include the power to add to the class of beneficiaries.

Samir Hussain

No is the simple answer. Only beneficiaries of full age, et cetera can make DOVs. As there are no doubt minor beneficiaries and of course unascertained beneficiaries who could benefit from this DT it is not possible to obtain a valid agreement to introduce charity beneficiaries.

Patrick Moroney

Are charities listed as potential beneficiaries of the DT? And is there a letter of wishes expressing the Testator’s wishes?

A Deed of Appointment could be made of assets out of the DT to charities which would then be automatically read back for IHT purposes. Charity exemption would then apply.

See IHTM42227