Deed of Variation - life interest trust will

Trusts Discussion
1

Hi there

I’ve got a will whereby A is life a life interest in the residue of B’s estate. The remaindermen are all over 18 y/o and I shall call them C.

Can A and C make use of a deed of variation to create instead a discretionary trust which would benefit from s142 reading back to avoid self-settling?

B died in 2024, and A and C all consent to this. The only people who will benefit under the new discretionary trust would be A and C.

Would such an arrangement be infringing on the rule against consideration in entering into a deed of variation?

I understand that at Saunders v Vautier cannot help us getting the s142.

Many thanks in advance, looking forward to hearing your thoughts.

2

Provided that A and C are together absolutely entitled to the trust fund (i.e. there is no provision for children, etc. to inherit if any of C die before A), they could enter into a variation to create a discretionary trust.

It should be noted, though that B will be deemed to be the settlor for income tax purposes (s.473 ITA 2007) as well as for IHT and CGT, provided that the variation includes the declaration that s.62(6) TCGA 1992 applies to the variation…

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

Hi Paul

Thanks for getting back to me so quickly!

The will says ( in summary): to A for life, thereafter to C as shall be living at the date of death of the survivor of C and B. Proviso they if any of C die before the date of death of the survivor of C and B, then their respective children will take at 21.

In light of your comment, and of the provision about the survivorship, I think that we cannot do a deed of variation? The entitlement of C is contingent on survivorship and has not yet been satisfied?

Thanks again