I am dealing with an estate where the father left the majority of the non-matrimonial assets to his son in his Will. His wife survived him and doesn’t need the assets but IHT is due on the gift to his son.
I can’t see why there would be an issue if a DOV was completed, son gifting to his mother the assets that are subject to IHT (i.e. assets over the NRB). She may or may not decide to gift them to her son by way of a PET but if she did, would there be a problem? I can’t see how it would be but something in my mind is saying this can’t be that easy. Can someone help to tell me whether this is possible or whether HMRC would deem the variation as void if a PET were made by the wife to her son afterwards?
I understand there can be no consideration. However, the wife may or may not decide to make this gift. This is only speculation at the moment so I may inform my client. His mother is in good health, and I actually think the son will not vary the Will as his parents were not on good terms (hence the gift being made to the son), but i’d be grateful for my benefit for future reference of other legal experts views on this.
Seems clear to me - there is some consideration at play, and hence subject to possible HMRC scrutiny. It would be even more obvious if the gift were made by mum shortly after assets were varied to her. If mother kept the gift for a ‘significant’ period of time, and there was genuinely no pre-ordained plan, then it would of course be legitimate, but on the facts, my suspicion is alerted.
HMRC will invariably ask if there is any arrangement for the surviving spouse/civil partner to pass anything back to those beneficiaries making the variation.
A frequent problem is that there has been discussion and such discussion has been recorded in correspondence or an attendance note, so that the beneficiaries cannot necessarily say “no”. If a professional adviser has been involved and the question is asked of them, if their professional body subscribes to the Professional Conduct in Relation to Taxation (PCRT) that adviser should not seek to avoid the question.
Like Haroon, in the situation in question there is a risk that HMRC might reject a variation, if made. However, which the variation would not benefit from s.142 IHTA 1984, it would still be effective in making a gift.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals