Deed of variation legacy to discretionary trust

My client (widower) has just been presented with a DoV of his late wife’s will. The DoV has been drawn up independently by his step-son (child of the deceased). The whole estate was left on a life interest for my client. The DoV carves out a legacy of let agricultural property (FBT) to a discretionary trust for the step-son and issue. My client is happy to sign this for various reasons.

My query is about rental income up to the date of the DoV. My client has been told by stepson’s solicitors that he will have to pay this back but my understanding is that income is received by and taxed as his up until the date of the variation. Also any ongoing tax problems for my client in relation to this passing into a discretionary trust as he was only the life tenant initially will he still be deemed to be the settlor for income tax purposes?


Lorraine Burkey

The entitlement to the income between the date of death and the date of the deed will depend upon the wording of the variation.

Unless stated otherwise, the DoV will be effective only from its own date, so that the intermediate income will remain with the widower. However, if the variation is worded so as to include the income from the date of death (e.g. the operative clause states the variation is to be effective “from the death of death of the Deceased”), then the widower will be giving up that income as well as the future income.

Whether or not the pre-variation income is to be paid over to the trustees, it will be the income of the widower for income tax purposes if it has already been paid to him. However, as the property passing under the variation was already settled by the deceased on her death, the deceased will remain the settlor for both income tax and CGT purposes, PROVIDED that the variation includes the appropriate declaration under s.62(7) TCGA 1992.

Paul Saunders

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Thanks Paul, v helpful

Lorraine Burkey