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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 9032
Experience:  I have been practising for 30 years.
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Dear All I am looking into the process of probate family

Resolved Question:

Dear AllI am looking into the process of probate for a family member and deciding how to split the assets between the two inheritors. After tax and costs it will be a 50/50 split of the assets between them.However as is often the case the assets are not simple to split as they are made up of a house, shares and some cash.Their plan is to have Person 1 pay the inheritance tax bill, then receive a larger percentage share of the house to make up for paying the tax.Person 2 would receive a smaller share of the house and a combination of shares and cash.It is important that the larger share in the house that Person 1 receives is not seen as a "gift" from person 2 as this will have tax implications overseas.The question is, what is the best way to go about this?
- Would this have to be done with a "variation" of the will?
- If the Will is found to be invalid due to a discrepancy, how else this be done? Would a "variation" be possible between the two inheritors?Regards
Submitted: 10 months ago.
Category: Law
Expert:  F E Smith replied 10 months ago.

What exactly are you trying to achieve here because I can’t see any reason why one person’s legacy should bear the tax and they get money as a result, to offset against the tax?

Ultimately, any change to the provisions of a will has to be done by a deed of variation which then treats the bequests variation is as if it was in the original will

Customer: replied 10 months ago.
First of all thank you for your reply.First a bit of background. Person 1 is living abroad in a country with strict rules relating to tax on gifts. Person 2 is living in the UK and wants cash.The wish of both is to not sell the house, and therefore trying to find an efficient way to distribute the asset. If they do a 50/50 split on all the assets, then the cash/shares will just about cover the IHT with little cash to spare.If person 1 buys greater share of the house from person 2, then person 1 will be liable for stamp duty as this is a second home. However, it is hoped that if person 1 pays the IHT bill and person 2 agrees a greater percentage of the house to go to person 1 via a variation of the will to balance this out, then no stamp duty will be owed.This would also mean that the transfer of the greater share of the house is not seen as a gift which will incur tax in the country where person 1 is residing.I hope this makes it a bit clearer, but let me know if you need more details.
Expert:  F E Smith replied 10 months ago.

The 2 beneficiaries are able to agree what they like between them and to deal with this by a deed of variation.

The proceeds of the estate would then be dealt with as though the variation agreed between the two parties was how the will was written in the first place.

I cannot comment on the tax situation in another country but if that’s what happened in the United Kingdom then the benefits purposes, the variation of the will would be seen as a deliberate deprivation of assets and any benefits received would be dealt with as though there had been no variation.

For tax purposes however it is dealt with as though that was the original will.

Customer: replied 10 months ago.
Thank you for your answer.From this I understand that on the UK side of things, the variation of the will is the way to go. I will look into how it will be interpreted in foreign law.Would a variation be possible even if a will is found to be invalid? I understand that this may seem a strange question, but there is a concern that the will itself was not properly prepared at the time (we are waiting for confirmation on this now).However, due there being only 2 beneficiaries anyway, it will still result in the same outcome as the will states with a 50/50 split.
Expert:  F E Smith replied 10 months ago.

If a will is invalid, then a deed of variation is not possible because the whole estate is dealt with under the rules of intestacy which are set in stone. It’s not possible to vary the statutory provisions although the beneficiaries could do what they like between them. You are absolutely correct however that if there is no spouse and only 2 children and the will said that everything was split 50-50, it begs the question as to why anyone would want to contest the will.

I am pleased to have helped you.

Please don’t forget to rate the service positive. It is an important part of the process by which experts get paid.

Best wishes.

FES.

F E Smith, Advocate
Category: Law
Satisfied Customers: 9032
Experience: I have been practising for 30 years.
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Customer: replied 10 months ago.
Thank you for your clear explanations to the questions raised.

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