WAE Variation Flashcards
Who is deemed to have made the gift under a valid s142 deed of variation?
The deceased, not the original beneficiary — for both IHT (s142 IHTA) and CGT (s62(6) TCGA) purposes.
Who must sign a deed of variation?
Only the original beneficiary and the new recipient need to sign — unless tax burdens are changed.
What are the IHT and CGT effects of a variation that satisfies s142 IHTA and s62(6) TCGA?
IHT: Treated as if the deceased made the gift directly to the new beneficiary.
CGT: No disposal by original beneficiary; new beneficiary acquires asset at probate value.
What is a deed of variation?
A written direction by an original beneficiary to change who receives an inheritance, allowing assets to be redirected to another person.
What tax problems arise if a beneficiary gives away their inheritance without a variation?
IHT: They make a PET (chargeable if they die within 7 years)
CGT: Any non-cash asset gifted is treated as a disposal, and they may owe CGT on any gain since death
What does s142 IHTA 1984 do?
Treats the variation as if the deceased made the gift directly to the new beneficiary, not the original beneficiary. This avoids PET treatment.
What are the conditions for s142 IHTA 1984 to apply?
In writing
Made within 2 years of death
Must state it is intended to take effect for IHT purposes
No consideration can be received by the beneficiary
Made by the beneficiary, not PRs (unless PRs are also beneficiaries)
What does s62(6) TCGA 1992 do?
Prevents CGT from applying to a variation — treats the new beneficiary as acquiring the asset directly from the deceased at probate value. No disposal by original beneficiary.
Can you vary just part of an inheritance?
Yes — a variation can apply to the whole or just part of the inheritance.
Can a variation apply after the inheritance has been accepted?
Yes — even after acceptance, a valid variation can redirect property.
