Deed of variation putting property into DT

Trusts Discussion
1

Testator bequeathed her flat (value £325,000) to daughter. Balance of estate £130K plus lifetime gift £47k. No TNRB or TRNRB. Allowance £500k IHT paid was less than £1,000.

On eve of 2nd anniversary daughter executed a document described as a deed of variation. Home made deed. Clause in deed says ‘by this deed AB is varying their entitlement to the Assets (the flat)under the will so that The Asset shall become part of the residue of the estate estate and become part of the Discretionary Trust set up in the will.’

There is no reading back provision. Will has been signed by the daughter and her husband (both are executors). No formal attestation clause but the deed has been witnessed by two witnesses.

Questions:-

  1. As there is no reading-back provision, is the variation deemed to be made by daughter and thereby deemed to be a gift by daughter?
  2. If it is deemed to be the daughter settling the trust, does that create a SDLT charge as the property is going into discretionary trust?
  3. If the result is a situation where the will trust has additional assets added to it by the daughter as an additional settlor? Assumption is that the fact there is no reading back, means that the RNRB is not lost in deceased’s estate as the property went to daughter outright. Or does the ‘resettlement’ trigger a loss of the RNRB in the deceased’s estate?

Michael McCabe

2
  1. Yes
  2. No SDLT - there is no consideration, and no applicable deeming provision, so no SDLT charge.
  3. RNRB survives (presumably through luck rather than judgement)

Also: presumably there is a risk of some lifetime IHT and CGT on the new chargeable transfer (unless the value of the property has gone down in 2 years). I assume no holdover.