The situation is similar for CGT purposes. If you use a Deed of Variation to transfer an asset, it will be treated as a disposal by the deceased’s estate rather than a disposal which you have made.
Tax advantages for the deceased’s estate
If a deceased’s arrangements are not very tax-efficient, it is possible to use a Deed of Variation to save tax for their estate. This may be especially useful where the deceased did not make any valid Will, and their estate will pass according to the Intestacy Rules.
Ways to save tax for the estate may include:
- Redirecting assets to beneficiaries who are exempt from paying IHT, such as a charity or a spouse.
- Redirecting assets which would qualify for relief from IHT, such as business or agricultural property, to make sure that available tax reliefs are not wasted.
- Taking advantage of unused Nil Rate Bands.
This is a complicated area of law. If you need guidance in using a Deed of Variation for these purposes, please contact us and we can advise you on your particular circumstances.
To provide for someone else
Where the deceased made a Will a long time ago, there is always the possibility that it did not reflect recent events, or changes in their intentions, at the time of their death. Similarly, if the deceased did not have a valid Will in place, the Intestacy Rules will determine who receives their estate – and this may not be the same person (or people) that the deceased would have chosen.
If you know that the deceased would have wanted to provide for someone, but – for whatever reason – you have received an inheritance from the estate and they have not, a Deed of Variation is a good way of resolving this.
Alternatively, you may feel that someone else would benefit more from some or all of the inheritance you have received.
Another possibility is using a Deed of Variation to avoid potential disputes from arising over an inheritance; a compromise to prevent lengthy and costly legal actions.
Whatever the reasons a Deed of Variation, using one will allow you to take advantages of the tax benefits described above – rather than simply making a gift to the other person yourself.