Deed of Variation

[Michael8626]

Hi,

My friend inherited an estate from his father in 2012 and I presume to avoid inheritance tax gifted it to his mother by deed of variation.

On the Land Registry title deed it states his mother cannot dispose of the land without a signed certificate from him stating his fathers will and deed of variation have been complied with or that they do not apply to the disposition. I do not understand this bit? Is there likely more documentation with a solicitor somewhere?

Is he reliant on his mother leaving this land to him in her will, has he just postponed inheritance tax?

Thanks

[Sam101]

It may be that it was the Fathers half of the home owned as Tenants in Common, was gifted into Trust with the mother retaining a lifetime interest to prevent it being sold whilst she resides there. When the Mother dies, she would pass her estate to her beneficiaries and the half held. That is not uncommon, but whilst he mother is alive the property cannot be sold.

It could be something else though. Do you know if there was a Trust involved or if Trustees were appointed, as there are so many different ways that inheritance tax can be saved with an estate that is likely to be in excess of £1,000,000. The estate value would be good to know as other information may help your friend.

[Michael8626]

Hi thanks,

No, no trust or trustees. The will said his mother could live in the property until she passed away but the property was passed in its entirety to the son, who by deed of variation gave it back to his mother.

Estate value £1.5m

By doing this has he just delayed inheritance tax?

[Sam101]

OK, so the son inherited the house but then, by DOV, gave it back to his mother thereby changing the original Will. Therefore the father owned the home himself and not as tenants in common with his wife.

However, there was an entry in the land Registry to say she could not dispose of the house, basically because the son registered his interest on the mothers death. This would possibly be if she wanted to move to a smaller property, then the son would agree. I still dont see how this was correct unless the DOV was worded accordingly, but it is just a safeguard .

The asset of the home passes to beneficiaries named in the mothers Will.

The IHT liability would seem to remain and after allowances there would be 40% tax on assets over £1,000,000 after all allowances of IHT and Residential allowances.

[Michael8626]

Thanks

[Sam101]

Have you taken any steps to minimise inheritance tax? Had the son not gifted the house back then it would have saved inheritance tax after 7 years

[Michael8626]

I don’t think he has yet, not sure what can be done

[Sam101]

Not sure until more information is known. If he would like some guidance, then this forum has members who may be able to help.