I am dealing with an estate whereby the Will left a number of large legacies to a number of charities and non-exempt beneficiaries. The Will also contained a right of occupation to the deceased’s partner (not married). The estate was such that the legacies had to be abated as there were not sufficient assets in the estate to pay them in full. However, the partner has now decided to sell the house meaning the right of occupation will come to an end. The legacies can then be topped up to their full using the house sale proceeds.
Are the “topped up” amounts treated as PETs from the beneficiary who has given up his right of occupation, or as this has occurred within 2 years of death, is it read back for tax purposes so that there would not be any PETs but that the full value of the legacies pass under the Will.
I suggest this would best be dealt with by way of a deed of variation
writing out the partner’s right of occupation.
As the deed will benefit the charities, they will need to be informed,
but do not need to be parties to the variation itself.
Thank you for your reply. Could a Deed of Variation be used if the Right of Occupation has ended - I was concerned that the Deed of Variation would not have anything to “bite” on if the Right of Occupation has already ended. The Will is drafted so that if the Right of Occupation ends due to the beneficiaries death then the net proceeds of the property (once legacies are topped up) would go to a different charity. Whereas, if the Right of Occupation ends due to the beneficiary selling and moving out, then the net proceeds go to the beneficiary absolutely. My concern is that 1) the default charity will not agree to entering into a Deed of Variation before the beneficiary moves out and 2) if we wait until the beneficiary moves out then the Right of Occupation has come to end, so is a Deed of Variation effective?
It seems to me that the property subject to the rights of occupation could be a specific devise, so that case specific advice should be obtained.
Is there any need to vary the Will if a transfer of value would be exempt? A ToV in the circumstances described is either exempt or chargeable – the one thing it is not is a PET.
For the exemption in IHTA s23 to apply, there must be a gift to charity. Although (if there is one) a reduction in the surviving partner’s estate consequent to his selling and moving out would not be a gift in the normal sense, s23(6) deems a gift to charity of property if it becomes the property of a charity.