I am dealing with an estate where husband has died, wife has survived him. The couple made life interest trust wills but at the time the wills were made (not by us) the property ownership was never actually severed so the property is still owned as joint tenants. Is it possible to rectify this now somehow?
Yes, via a post-death Deed of Variation by wife. (There is also an argument that there is a severance by conduct if mutual Wills were prepared.) No severance but life interest in Will
Ihsan Ali
I Will Solicitors Ltd
Thank you. Just to check, thats achieved by surviving wife making a gift of a half share of the house then into a life interest trust by deed of variation rather than an actual severance being signed?
Yes, via a Variation to sever the share into husband’s estate. The executors in husband’s Will can then assent this to the trustees of the life interest Trust.
Ihsan
I cannot agree with Ihsan that the husband’s executors have any title to assent to the beneficiaries under the suggested variation.
On the husband’s death the property passed absolutely to the widow, both in law and in equity. If she executes a variation to notionally sever the joint intertest this has retrospective effect only for IHT and some aspects of CGT, provided the variation includes the appropriate declaration(s) – it does not re-vest any interest in, or title to, the property in the deceased husband’s estate.
Following a variation to notionally sever former joint property, it is for the surviving co-owner(s) to transfer the relevant interest to those benefiting under the variation.
In this case, it will be for the widow to assent the equitable interest to the trustees.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thank you. Sorry if this is a stupid question but there is already a life interest trust in husbands will but the severance wasn’t done. So how does the severance actually take place in the deed of variation? I think I am missing something as I don’t understand how we separate the joint tenancy, who are we giving it to as we want wife to still have the life interest??
What you need is a precedent, possibly two needing to be combined. One clause severing the joint tenancy and another directing the severed share where it is to go, amongst others. There are numerous sources often with commentary. As ever a precedent should only be used if the law underpinning it is understood. E.g. a property lawyer should only attempt it if he has knowledge of the tax issues where it is desired to have fiscal effect or has a colleague who does.
When I was a senior manager in an international firm of accountants I made suggestions to a partner for additions to the Library. He said “Why? I have never read a book in 5 years”. And he was The Library Partner! Not that kind of colleague then!
Jack Harper
A deed of variation is merely a deed of gift by (in this case) the surviving co-owner, which may be treated for IHT and some CGT purposes only as though the dispositions of the variation had been made by the deceased.
The terms of the variation, whilst purporting to change the dispositions of the will, have no effect on the content of the will. Accordingly, the fact that the will contains a life interest is irrelevant for that gift has irredeemably adeemed as the property passed outside of the will. Whilst the variation might purport to sever the former joint tenancy and leave the deceased’s share of the property on the trust on the same terms as set out in the will, the settlor will be the surviving co-owner (i.e. the widow) other than for IHT, and then only as a result of the deeming provisions of s.142 IHTA.
If you are not experienced in the use of a variation, as Jack indicates you should engage with a (fellow?) professional who has the appropriate knowledge and experience and access to a suitable precedent.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I agree with your comments having re-read my post. The Deed of Variation would only be read back as if the deceased’s half share passed under his estate for IHT and CGT purposes (if the declarations are made). For all other purposes, the share passes to the widow who is then making the gift and responsible for the assent.
Ihsan
Paul and Jack have clearly answered the original post as to whether a variation is possible, but in view of the further posts I would suggest that dubbins01 should now give further consideration to the question of what, if anything, might be achieved by such amendment?
Just because something is possible does not mean it is helpful!