WE 2 - Variation

Question 1

Variation & Disclaimer

Question 2

What is the effect of a variation?

Answer 2

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

Question 3

What are the conditions to make a variation?

Answer 3

• 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

Question 4

When can PRs refuse to approve the variation?

Answer 4

If the writing back creates an IHT charge!and the funds they hold are insufficient to cover the tax.

Question 5

How often can each asset be varied?

Answer 5

Once

Question 6

Can a minor / person who lacks mental capacity vary?

Answer 6

Yes but needs approval from court

Question 7

When can a variation be made?

Answer 7

• Before or After acceptance.
• May apply to whole or part
• Original beneficiaries choice as to who received the variation

Question 8

When can a disclaimer be made?

Answer 8

• 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)

Question 9

When can a disclaimer be made?

Answer 9

• 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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Question 10

What is Precatory Trust?

Answer 10

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.

Question 11

Are Precatory Trust’s binding on the donee?

Answer 11

No

Question 12

What are the IHT rules on Precatory Trusts?

Answer 12

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.

Question 13

What are the CGT rules on Precatory Trusts?

Answer 13

No special rules, therefore re-distribution is treated as a disposal by the original beneficiary.

Question 14

NEED TO DO PURPOSE TRUSTS