Is it possible to vary the terms of a Will by way of Deed of Variation to stipulate that income received by the estate after the person has died passes to a particular individual?
Martyn Dixon
Harold Bell Infields & Co
Yes, although the tax consequences may depend on whether the will created a life interest or an absolute interest.
If the later, is the variation to apply merely to the income, or also to the underlying capital?
If it is a gift of capital, with the intention that the original beneficiary receives neither the income or capital, the variation will need to be worded appropriately so that it is deemed for all purposes to be effective from the date of death (and not from its own date).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Dear Paul
Thank you for your useful message. The Will provides for the capital to be split 50/50 between two brothers and this wll remain the case. My instuctions are to vary the WIll so that any income received post-April 2023 until finalisation is assigned to one of the brothers. It is mainly for income tax poutposes, but I wonder if it would also be effective for IHT purposes.
Martyn Dixon
Harold Bell Infields & Co
It would be effective for IHT if the relevant words were used in the deed, but it would be ineffective for IT. The income to date will (eventually) be taxable on the brothers equally as estate income that has suffered tax at 20% or 8.75%. You can’t change the past. I’m doubtful that you could change the future such that A had the income and B retain the capital (well you could, but it would be a settlor-interested trust).