Making the Most of a Deed of Variation
Capital Transfer Tax (CTT) legislation in the United Kingdom provides options for redirecting inherited property by deed to another party eliminating the involvement of the original recipient in terms of tax liability. This can be done three ways - by deed variation, a disclaimer, or an appointment of property by trustees of a discretionary trust. This should be considered even after the death of a spouse; the surviving spouse would be doing her survivors disservice by accepting all of the assets of her spouse. The assets of the deceased spouse can be handled under a discretionary trust. Another use for deeds of variation would be to skip generations in inheriting. An individual with an already substantial estate can pass the inheritance directly to the next generation. When agricultural or business property are acquired, it may be beneficial to have the surviving spouse be entitled to a pecuniary legacy by a deed of variation. Property inherited from a non-domiciled testator is exempt from CTT. A deed of variation could be made to settle a trust which pays him an income.
Publication Name: Accountancy
Business protection - insuring the goose or the golden egg?
Few UK businesses have protection covering the likelihood of the death or serious illness of a director, partner, or key employee, and the lack of protection planning is the reason that many businesses fail after such an occurrence. The situation is the result of the fact that only 25% of people have a will, the general lack of Inheritance Tax planning in family businesses, and deficiencies in the language of insurance policies covering businesses. Businesses must adequately plan protection in the area of key employees, partnership insurance, share protection, and family business. Any employee whose loss would create a financial loss to the firm should be insured. The liabilities of partners must be covered thorough adequate planning. Flexible cover should be implemented to stipulate the desires of directors in case of a sudden death. Family business should focus on all the implications of the Inheritance Tax in their tax planning.
Publication Name: The Accountant's Magazine
Where There's a Will There May Be a Way to Save Tax
Deeds of variation can be lucrative devices to redirect property left in a will. The effect of making a variation or a disclaimer is that the person becoming entitled to property is deemed to be a legatee under the original will. The consequence of this is that when the deemed legatee acquires an asset from the estate, no chargeable gain accrues to the executors and the legatee's CGT acquisition cast is the original probate value. The stamp duty legislation does not contain any special rules for deeds of variation and duty will normally be payable on a deed as a voluntary disposition inter vivos. There is no special income tax legislation for deeds of variation and disclaimers. The ability of taxpayers to make deeds of variation and disclaimers presents considerable scope for tax planning.
Publication Name: Accountancy
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