We must disagree Paul.
s142 (1)(a) says" any of the dispositions (whether effected by will, under the law relating to intestacy or otherwise) of the property comprised IN HIS ESTATE immediately before his death are varied". My emphasis.
s5(1)(b) says “the estate of a person immediately before his death does not include excluded property”
s6(1) says: “Property situated outside the United Kingdom is excluded property if the person beneficially entitled to it is an individual domiciled outside the United Kingdom”
Ergo: a variation is not competent to vary the dispositions of excluded property under the will or intestacy of a non-domiciliary.
The bringing of the deceased’s assets to the UK AFTER his death does not make them chargeable ON his death.
A purported variation of excluded property is not however devoid of UK IHT significance as it will be a PET or CLT by a domiciliary like any variation of a UK chargeable estate (inclusive of a non-domiciliary’s UK or Sch A1 assets) where reading back is not elected under s142 or is out of time.
s142 is not about varying the estate of the beneficiary of a will or intestacy but of the dispositions of the estate of the deceased.
It may be valid under a law of the UK if that is the applicable law under its PIL, which may however apply the foreign law. I am not an expert this area but my trusty Cheshire North and Fawcett tells me that the nature of the asset is crucial, whether immovable, tangible movable or intangibile movable. That the lex situs has an awful lot going for it but also the law of the transfer, which may well also be the lex situs. My uneducated guess is that the variation of an estate administered under foreign law or the transfer of assets comprised in it not at the time located in the UK (tangible movables might be perhaps) is likely to be governed by the foreign lex situs of the asset or its transfer under the PIL of England & Wales at least.
Good luck with defending its legal validity to anyone who purports to transfer by a document in English Law form, whether or not expressly governed thereby, or worse governed expressly by a foreign governing law, an asset which at the time has a foreign situs under the PIL of the lex fori, at least if that forum is a court in England or Wales.
What HMRC make of all this I have no idea. I suspect they would want to fudge it but I am very surprised that they would accept a s142 variation of an estate of a non-domiciliary that contained NO actual or deemed UK-situate property at the date of death. A gift of such an asset by a UK domiciliary is obviously fully competent in law in principle but surely at risk of a challenge, by any who stand to gain, on the basis that the gift is not effective in English, Scots or NI Law plus its PIL or the foreign law which it applies to determine legal validity.
So in the example of the USA deceased. the UK beneficiary cannot vary the US estate’s substantive dispositions under s142 and if £500,000 is received in the UK when it is settled into the DT, the settlor for all UK tax purposes is the UK-domiciled transferor. If he settles an intangible right to the legacy, or cash while it is still in a US-situate bank account, the effectiveness may theoretically depend on the law of one of the United States. But if the cash is then later transferred to the DT it is an effective CLT in my view for all interested parties. The transferor would be estopped from pleading legal invalidity, though it might defer the IHT timing of the transfer if HMRC took the point.
Jack Harper