What is the effect of the variation of a testamentary disposition?

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“I have an interesting SDLT issue on which I would like advice if possible.

I have a deceased estate. The deceased had two properties – her own residence and a buy to let. She has two children. Both children have other properties and neither will be having either of these houses to live in themselves. The son wants one house and to buy out sister. The sister wants the other house and to buy out brother.

SDLT at the higher rate will certainly be payable on the amount paid for the half share in each case if matters proceed in this way. But my client has asked if we could do a deed of variation of the will so that mother is deemed to gift the one house to the son and the other to the daughter.  Then it would be an assent of each house to each person for nil consideration – normally assents do not require SDLT.”

Source: BLG Member

 


This should work.

A transaction which varies a disposition (whether effected by will, under the law relating to intestacy, or otherwise) is exempt from the charge to SDLT if the following conditions are met:

1) the transaction is carried out within the period of two years after a person’s death

2) no consideration in money or money’s worth other than the making of a variation of another such disposition is given for it.

The exemption mirrors the relief from inheritance tax in section 142(3) IHTA 1984.

The acquisition of property by a person in or towards satisfaction of his entitlement under or in relation to the will of a deceased person is also exempt.

These exemptions mean that both the variation and the vesting of the deceased’s asset in the substituted beneficiary are exempt from the charge to SDLT. There is nothing in the legislation introducing the 3% surcharge that overrides them.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

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