I am acting in the administration of an estate where one child has been left a right to occupy the family home and thereafter the property is split between her and her brother. The children have agreed between themselves that the occupying child’s final share in the property increases slightly with the non occupying child receiving a sum of money now. Unfortunately there is insufficient cash in the estate to give to the non occupying child and consequently the occupying child is providing the funds.
I have been contemplating whether we can put in place a deed of variation to record the change in the vested proportions of the property with a cash legacy for the non occupying child but am concerned that I would need to change the order of abatement and also such an arrangement will fall foul of the rule that there must be no consideration given for a deed of variation. I am coming to the conclusion that a deed of variation is impossible and a declaration of trust is needed.
If I have understood the proposition correctly, currently the house is given to the children “in equal shares”. However, their wish now is that they, say, receive it as to 75% for A and 25% for B, with A giving B £50,000 to help balance out their net entitlement from the estate.
s.142(3) states: Subsection (1) above shall not apply to a variation or disclaimer made for any consideration in money or money’s worth other than consideration consisting of the making, in respect of another of the dispositions, of a variation or disclaimer to which that subsection applies
I have seen many situations where an estate is effectively comprised of the deceased’s home and one child has wanted to take that in its entirety and pay their sibling(s) “equality money”. A variation has been made in which the house if given to the child and specifically charged with the payment of a cash sum to the other sibling(s). The cash sum has generally been raised by mortgaging the property, although may also be satisfied out of the personal resources of the child who takes the house. I am not aware of HMRC claiming that such an arrangement falls foul of s.143(3), as the cash “gift” under the variation is a variation to which s.142(1) applies.
It is important that the variation is worded to ensure that the gift of the property is charged with the liability to pay the cash sums.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals