Inheritance tax avoidance
This case study demonstrates the expertise of our Wills, Trusts & Tax Planning team who have recently advised a client on deeds of variation, inheritance tax and discretionary trusts.
When someone benefits from a deceased person's estate under a Will or intestacy, or as the surviving owner of a joint asset, he or she may wish to redirect the inheritance to others. There are considerable tax advantages if this type of gift is made by a qualifying deed of variation.
A deed of variation which satisfies the relevant conditions will not trigger a tax liability for the original beneficiary. Instead, for all Inheritance Tax purposes (and in important Capital Gains Tax respects) the gift effected by the deed will be treated as if made by the deceased.
This statutory fiction enables tax exemptions to be claimed retrospectively and can prevent unwanted assets from entering someone's chargeable estate.
Deeds of variation also provide unique opportunities for trust creation without the usual limitations imposed by 'reservation of benefit' rules or 'pre-owned assets' income tax. So they should definitely be considered by those who wish to keep an inheritance but reduce their tax exposure.
For further information please contact one of the team.
