A died leaving estate to B and C. B died a month later leaving his whole estate to C . Both died this year. No survivorship period in A’s will so B had a vested interest in half A’s estate.
A’s estate well below IHT threshold. B’s estate well above.
Can C vary A’s estate on behalf of B as his executor and sole beneficiary so the whole of A’s estate is now left to C?
And now a second query concerning Deeds of Variation again. C wants to vary B’s estate now (C is sole residuary beneficiary) to include charitable legacies (in line with B’s deathbed wishes and to reduce the considerable IHT liability. She wants time to decide which charities to benefit but wants to finalise the IHT 400 and get Probate asap. C has decided on amount she wants to leave charities via deed of variation. Is best way to draft replacement Will leaving the set amount to a discretionary trust of which the only objects are charitable ones. Is this sufficient to enjoy the IHT exemption.
As B was a beneficiary of A’s estate, it will be C as B’s executor AND beneficiary who will need to vary the disposition of A’s estate. Technically it is B’s executor who makes the variation (being the “original” beneficiary) but HMRC require the beneficiaries of the deceased beneficiary also make the variation.
As regards the further variation of B’s estate, provided that the discretionary trust is exclusively charitable then s.23 IHTA 984 should apply. Personally, I would not purport to “replace” the will, but include an additional clause before the gift of residue creating the charitable fund. If, for example, residue is clause 6, the variation might state that the dispositions of B’s estate are varied as though the clause set out in the schedule had been included within B’s will immediately before clause 6.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I am not sure the DoV you propose will work to get the Charity Exemption as it is a requirement that the charities acknowledge the redirection so until you do a subsequent appointment to the chosen charities the exemption may not be available
If the deed of variation creates a discretionary trust to make
distributions from time to time for exclusively charitable purposes
then, it seems to me, that what has been created is itself a grant
making charitable trust which will have to be registered with the
Charity Commission and be subject to all the regulatory burdens imposed
on charitable trusts.
The gift would qualify for IHT exemption and it would be the trustees of
that trust which would have to acknowledge the redirection; but as a
temporary expedient to hold the money while a decision is made on which
charities are ultimately to benefit it seems far from ideal.
Re Nigel’s post, s142(3A) and (3B) IHTA 1984 merely require that “the appropriate person has been notified of the existence of the DoV”.
For present purposes (as pointed out by Michael) the “appropriate person” would be the trustees of the DT.
Thus, until the trustees (in this case) have been notified of the DoV’s existence (and preferably have acknowledged receipt of notification) the DoV should not be submitted to HMRC.
The variation could be directed to a registered charity providing Donor Advised Fund (DAF) administration. There are such charities available. The DAF provider will make a charge but the IHT relief is secured up front and the donor can then give directions for the distribution of the funds at his leisure.