Q: My mother has passed away. She was a wealthy woman and I am to inherit half of her estate. However, I already own a high value estate and I know that my own estate will be subject to inheritance tax when I die. Is there any way that I can redirect the inheritance due to me to my children instead, without my own tax position being impacted?
A: Yes, you can redirect your entitlement to someone else by executing a formal “deed of variation”. A deed of variation is a legal document that allows a beneficiary of a deceased’s estate to vary the terms of a Will.
Your deed of variation could vary your late mother’s Will so that your children inherit half of her estate instead of you. The changes made in the deed of variation are ‘read back’ into the Will. This means for the purposes of inheritance and capital gains tax it will be as if the gift was made from your mother’s estate and not yours.
If you accepted the gift from your mother’s estate and then made your own gift in your lifetime to your children, the gift would be considered a ‘potentially exempt transfer’. This means that if you died within seven years of making the gift, it would be taken into account as part of your estate, which for you would be problematic as your estate is already above the inheritance tax thresholds. The overall effect being increased inheritance tax being paid from your estate.
If you’re trying to work out the best way to structure a deed of variation you should seek professional advice, as the last thing you want is for the variation to have unintended consequences for you or the other beneficiaries of the estate.
You can enter into a variation before or after a Personal Representative obtains the ‘Grant of Probate, but for tax reasons any changes must be made within two years of your mother’s death.
This question has been answered by Ulia Choudhry, a Partner with GHP Legal. If you would like to speak to someone about this or any other legal matter, please visit our website www.ghplegal.com and use the contact us form, or call us on: Wrexham 01978 291456, Llangollen 01978 860313, Oswestry 01691 659194
Can I redirect the inheritance that is due to me to someone else?
