Approached by a client with a set of circumstances I have not encountered before, any advice would be appreciated in order to confirm my understanding. As follows:
Spouse died in 2017, leaving her share of property, as a tenant in common with spouse, with a Form A restriction on proprietor registry, to 3 children.
Subsequently a deed of variation was used to transfer the share from the children to the surviving spouse in order to preserve IHT nil rate band and transfer later.
No change of circumstances was ever registered with land registry. Second spouse has now died and left the whole estate to children.
Is the deed of variation valid for IHT purposes due to the Form A restriction and ‘trust of land’ circumstances?
If the DOV is valid, what are the implications given that the Land Registry was not informed/updated. would the trust have come to an end upon the sole surviving tenant in common inheriting the property via the will?
Any advice on how to proceed with transferring the property to the new benefactors/children?
A failure to amend the title at HM Land Registry will not affect the validity of the variation.
On the understanding that legal title remained in the sole name of the surviving spouse, I suggest their PRs may simply assent the legal title to the 3 children as tenants in common.
In effect the deed of variation, by bringing together both shares of the property in the surviving spouse “terminated” the original trust, with a new trust arising under the surviving spouse’s will in favour of the 3 children.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Hi Paul, thanks for your response and insight. Highly appreciated.
Could you possibly comment on IHT implications?
Is it as simple as the fact that as the deed of variation diverted the residence back to the surviving spouse, that he can now claim the claim the unused NRB from the deceased wife, as well as her Residence NRB. Added to his, the current allowance would be £1mil?
Probate was granted originally, and the estate came in under NRB for wife.
You state " a new trust arising under the surviving spouse’s will in favour of the 3 children" does that indicate the house was held ‘in a trust’ and so must be declared this way on the IHT400 form or is the conveyancing legal parlance?
" a new trust arising under the surviving spouse’s will in favour of the 3 children" – I confirm that this is merely “conveyancing jargon”. The house was owned solely by the surviving spouse at the time of their death without the existence of any trust, notwithstanding the restriction on title at HM Land Registry.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals