The deceased died 2003. The main residence was sold 2004 and a Deed of Variation was entered into in 2005.
As the Deed rewrote the will reference has been made to the main residence which of course had already been sold.
The property was put into trust for the grandchildren as a result of the DOV.
Who has made the CGT disposal?
1. The estate?
2. The trust?
Thanks in advance.
Daren Peacock
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Replies (3)
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Disposal
The Disposal was legally made by the estate as the administrators would not have assented to any bequest at that time.
The effect of the DOV is to treat the proceeds of the sale into settlement as the asset is not owned by the estate at the date the deed is executed.
From an IHT point of view the declaration treats this as property added to the settlement by the will of the deceased.
From a CGT point of view the opinion of House of Lords in Marshall v Kerr is that the declaration avoids the gain that would otherwise arise on the disposal of the right to have the assets of the estate administered in your favour as beneficiary.
So the higher CGT allowance should apply.
Hi Darren
Sorry about the delay - I only received your comment today - May 9th - don't worry about the DOV - consider the identity of the persons who conveyed the interest in the property - they are the persons who made the disposal.
So if the conveyance was by the executors pre-DOV they made the disposal - but the gain arises at the date of entering into the contract not the date of conveyance.
If the conveyance was by the trustees post-DOV, but the contract was entered into before the DOV, the disposal is by the trustees, and it will be a trust gain, arising at the later of the date of the contract pre DOV and the date of the DOV itself.
Seems loopy but the House of Lords decision in Jerome v Kelly makes clear the consequences outlined above!
IHT Newsletter April
This from the above and shows that the revenue position - at least in relation to IHT - is that a DoV does not alter the real world consequences. Have you also directed these tiresome peple to Jerome v Kelly?
Our Probate & Inheritance Tax Helpline have
received a number of enquiries from solicitors
about how, or whether, form IHT200 should be
completed where
there are two deaths – usually husband and
wife – within 2 years of each other, and
within 2 years of the first death, the
beneficiaries of the second to die effect an
Instrument of Variation (IoV) to redirect
property from the first estate away from the
second so that both estates, for IHT
purposes, are below the excepted estate
limit.
Our August 2004 Newsletter covered this issue
in some detail but to recap…
The underlying principle is that the hypothesis
created by the IoV only takes effect for IHT
purposes. It does not alter the real world
position of the second estate at the date the
second person dies. So if, in the real world, the second estate did not qualify as an excepted estate, form IHT200 is required.
In the real world the disposal was made by whosoever conveyed title and DoV cannot affect that.