6
For IHT, a person’s estate includes assets
held in trust in which they had a right to
get some personal benefit and gifts from
which they keep back some benefit. A
variation that seeks to change who is to
receive assets in either category cannot be
treated for tax purposes as if the deceased
had made it.
7
The destination of the same assets or
entitlement passing under a Will or by
intestacy, may not be varied more than
once. Any variation that does so will not be
treated as if the deceased had made it.
So, a legacy of, say, £10,000 cannot be
redirected from the original beneficiary
to someone else, and then on to a third
person. But if a beneficiary receives
a legacy of £100,000 and redirects
£10,000 to someone else, he or she can
subsequently (out of the £90,000 left),
give another £10,000 to that same person,
or a completely different person. And, if
one beneficiary has already varied their
share of residue by one variation, another
beneficiary may vary their share by a
subsequent instrument, because it is not the
same entitlement that is being varied.
8
Where a variation increases a legacy, or
includes a new legacy to charity, the charity
must be notified by the taxpayer that assets
are being redirected to it and evidence of
this notification must be given to HMRC. But
this does not mean that the charity has to
sign the variation. Copies of an exchange of
correspondence showing that the charity is
aware of the legacy will be sufficient.
If the charity is not told about the
variation, then it cannot be backdated for
tax purposes.
9
Where a variation is made and assets from
outside the estate are used to compensate
the original beneficiary for their loss, the
variation will not be treated as if the
deceased had made it. For example, A dies
leaving an estate of £300,000 to his sons.
They sign a variation to give the assets to
their mother. To compensate them, their
mother pays them £300,000 from her own
assets. Even if the variation contains a
statement of intent, it will be ignored in
working out the IHT that is payable on
A’s death.
If the variation is not effective for tax
purposes, the changes will count as
transfers made by the beneficiaries whose
inheritance is being varied.
10
If the variation changes the IHT that is payable,
you should follow the instructions on the top
of page 2 of this form.
11
The beneficiaries of a person who has died may
make a variation that changes that person’s
entitlement from an earlier death. The
variation must meet all the conditions above
and be made within two years of the date of
the earlier death. Again, you should follow the
instructions on the top of page 2 of this
form, if the variation changes the IHT that is
payable.
Page 3
Notes – Continued