Deed of Variation one legatee won't sign

Wife died November 2018 net estate £408,000, excluding joint dwelling to husband by survivorship.
Her estate bequeathed to 2 children & 2 grandchildren, all 4 residual legatees over 18, IHT paid £33,200.
The widowed husband died November 2019. His net estate including the dwelling £452,200. This value less than £625,000 (his Nil Rate & RNR x2) No IHT payable.
To obtain repayment of IHT paid by late wife’s executors, Deed of Variation prepared to provide £83,000 pecuniary bequest for (now deceased) husband & residue to 4 legatees. One of the 4 residual legatees is refusing to execute the Deed, to obtain £33,200 IHT repayment. The two year clock is ticking, the residual legatees have been provided with calculations & advised to seek independent Tax/legal advice. One residual legatee is still refusing to execute the Deed.
I’d be grateful for any advice Forum members can offer.

Gillian McClenahan

I don’t see there’s anything much you can do.

If the residual legatees are in absolute shares, there is one option but it’s pretty unattractive. The other three could just vary their shares in favour of late father/grandfather but this would mean a windfall for the uncooperative beneficiary i.e. if they were in equal shares he/she might receive an extra £20.75k (to the detriment of the other three) which would mean he/she receives most of the tax saving.

Andrew Goodman
Osborne Clarke LLP

The three RLs Who are willing to sign would have to share the Legacy from their shares but any refund of tax would I think, have to be paid to the four. Not very satisfactory.

Patrick Moroney

Can you not vary the estate so that she share that is going to the 3 who will agree to the variation goes to the husband and the person who does not agree to the variation still receives their share and therefore does not need to be party to the deed? There would still be some NRB available to pass the quarter share to the non signing beneficiary and then use the balance of the TNRB from wifes estate to add to husbands estate together with his NRB and the RNRB as needed?

Gemma Van Duke
Bishopsgate Law

Yes I agree & doubt the 3 who wish to execute Deed would be happy to increase the entitlement of the unwilling.

I wonder could the 3 sue the uncooperative 4th residual legatee, after the 2 year deadline expires in November…

Gillian McClenahan

As IHTA 1984 s 142(1) requires any disposition to be varied under a DoV to be made by those initially inheriting the refusal by one of the four residuary beneficiaries to sign the DoV means the whole of residue cannot be varied under s142.

I do not see how this beneficiary can be made to sign.

Presumably the other three residuary beneficiaries could vary their interests in residue to make the legacy. This would then seem to mean that the refusing beneficiary then keeps his 25% of the £83,000 legacy and also then shares in the resultant IHT saving due to the other three making the DoV.

On my calculation by participating in the DOV the refusing beneficiary receives £4,150 less than he would otherwise inherit under mother/grandmother’s will.

Malcolm Finney

I doubt if they would be successful but I’m not a litigation expert.

Patrick Moroney
BWL Solicitors