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Deeds of Variation
14/04/2011
A beneficiary under a Will has always been able to assign the benefit of his gift, but a feature of the inheritance tax (IHT) legislation is that, provided certain conditions are met, the redirection of the benefit is not itself a transfer of value but takes effect for IHT purposes as if the disposition as varied had been contained in the Will. Capital gains tax (CGT) legislation contains a similar but narrower provision to the effect that the redirection need not be a chargeable event.
Such redirection has to be by instrument in writing. It does not have to be by deed but, for reasons mentioned below, it generally is, such a deed formerly being known as a “deed of family arrangement” and now more usually as a “deed of variation”.
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Disabled Person's Interest
14/04/2011
Trusts created for the benefit of a disabled person qualify as ‘special’ for IHT purposes provided certain conditions apply. This means such settlements are outside the relevant property regime and subject to s.49(1) IHTA 1984 instead.
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Discretionary Trusts
14/04/2011
A discretionary trust exists where the trustees have discretion over the distribution or accumulation of income and/or the appointment of capital. An essential feature is that whilst the power of accumulation of income exists or the power to appoint capital exists no beneficiary has any right to require the trustees to exercise their discretion in the beneficiary’s favour. This means that a class of beneficiaries exists from which any may be chosen for benefit but no beneficiary within the class has any right to enjoy income or capital at a particular time.
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Domicile
14/04/2011
The question of what is a person’s domicile is an increasingly frequent question which has to be addressed by the Wills, Probate, Trust and Tax practitioner due to increased mobility of people within the European Union and the global economy. To which jurisdiction would a person be linked for succession law purposes? Which state would seek to apply its tax laws to the wealth and assets of this person or trust?
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DOTAS & IHT
17/06/2011
The Disclosure of Tax Avoidance Schemes (DOTAS) system was introduced for certain taxes in 2006, the statutory framework having been included in the FA 2004. Inheritance Tax (IHT) was not included at the start. The objectives of the disclosure rules are to obtain:
- Early information about tax arrangements and how they work; and
- Information about who has used them
which clearly gives HMRC the opportunity to consider their impact and where appropriate to put forward legislation to close a particular scheme down.
With effect from 6 April 2011 schemes which seek to avoid IHT charges associated with the transfer of property into trust come within the disclosure rules.
