I have inherited two files where two sisters died within 2 months of each other. the first sister’s estate passed (subject to some small legacies) to her other sister. IHT was payable on the first sister’s death. The second sister, due to the first sister predeceasing her, left the residue of her estate to 5 charities.
The same executor acts for both estates. Am I correct in thinking that with the agreement of the charities, as PR of the second sister’s estate we could prepare a deed of variation of first sister’s estate leaving her estate to the charities directly and then reclaim the Inheritance Tax?
We are still within the 2 year period
Graham & Rosen
I agree that the PR of the second sister’s estate can enter into a deed of variation to pass the estate of the first sister to the charity beneficiaries under the second sister’s Will, provided that
the charities consent. In the circumstances there is no reason why they would not consent, given that the DoV will lead to a repayment of the inheritance tax paid in the first sister’s estate.
You are correct Paul. However if you have not already submitted the IHT 400 and paid tax, you could arrange for the DOV to be executed prior to completing the papers for the first sister. You could then submit this with the papers and avoid paying any tax as getting tax back from HMRC can take some time. As you’re probably aware, the charities should be parties to the deed along with the executors.
Yes, you can.
I was recently involved in the aftermath of one of these that went wrong. The best way to avoid the problems that arose in that case is for all of the charities to be parties to the deed, thus giving their consent and being notified for the purposes of s. 142(3A).
Yes, a variation may be made in these circumstances.
HMRC should accept it provided that s.142(3A) IHTA 1984 is com plied with.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I cannot take credit for this, but I have recently looked at something similar and have to give credit to both @simonnorthcott and @MalcFinney
I Will Solicitors Ltd
In the circumstances that you mention it may be possible to vary the first will so that the charitable gifts go straight to the charities and do not fall into the estate of the second will. You are right that it will have to be with the charities’ approval, however, if it is increasing the gift to the charity there is a good basis for them to consent to the variation.
The requirements of IHTA, section 142 (and TCGA, section 62(6)) must be complied with.
Old Square Tax Chambers