WE 2 - Variation Flashcards
Variation & Disclaimer
What is the effect of a variation?
The gift from the original beneficiary is read back to the date of the deceased’s death and treated for IHT purposes as having been made by the deceased to the new beneficiary.
The beneficiary doesn’t make a PET
IHT is calculated as if the deceased left the property to the new beneficiary
- same effect for CGT under s.62
What are the conditions to make a variation?
- made by original beneficiary in writing (no need for a deed)
- contains an express statement that s142 should apply
- within 2 years of death
- no consideration
When can PRs refuse to approve the variation?
If the writing back creates an IHT charge!and the funds they hold are insufficient to cover the tax.
How often can each asset be varied?
Once
Can a minor / person who lacks mental capacity vary?
Yes but needs approval from court
When can a variation be made?
- Before or After acceptance.
- May apply to whole or part
- Original beneficiaries choice as to who received the variation
When can a disclaimer be made?
- only before acceptance
- only disclaim the whole gift
- treats the original gift as failed
- Original beneficiary cannot chose who the gift goes to
- does not disclaim their rights under intestacy (which may now apply)
When can a disclaimer be made?
- only before acceptance
- only disclaim the whole gift
- treats the original gift as failed
- Original beneficiary cannot chose who the gift goes to
- does not disclaim their rights under intestacy (which may now apply)
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What is Precatory Trust?
a gift is made to a beneficiary by will with a wish expressed as to how the beneficiary should pass on those assets to others.
Are Precatory Trust’s binding on the donee?
No
What are the IHT rules on Precatory Trusts?
If the original beneficiary acts on the wishes within 2 years of death, they are treated as gifts made by the testator’s will.
- NO written election is required writing back will occur automatically.
What are the CGT rules on Precatory Trusts?
No special rules, therefore re-distribution is treated as a disposal by the original beneficiary.
NEED TO DO PURPOSE TRUSTS
