Can I pass my inheritance to my children?
17 September 2019 by Lauren Hancock
Occasionally, someone inherits from an estate and (for tax reasons or otherwise) wishes for their inheritance to be redirected, often to their own children. There are a number of ways of achieving this.
Some decide to simply gift their inheritance to their children. Though possible, there are potential inheritance tax implications to redirecting your inheritance in this way. This is because, any gifts made in the seven years prior to death are potentially taxable for inheritance tax.
A possibly more tax efficient option is to redirect your inheritance by way of a “deed of variation”. This type of deed can be drafted so as to say, the gift was made directly by the deceased to your children and as such that it never touched your hands.
By using a deed of variation, the total of any gift left to you in the deceased’s will would not be considered as part of your own estate for inheritance tax purposes. This means that the seven year rule becomes irrelevant.
For example, Jack is Tom’s father. Tom has a daughter, Kate. Jack passes away leaving his entire estate in his Will to Tom. Tom is concerned that this inheritance will push his own estate over his inheritance tax free allowance on his death. He therefore decides he would like to redirect this inheritance to Kate.
A deed of variation is prepared which states that Jack’s entire estate will pass directly to Kate. From an inheritance tax perspective, it is as though the estate was left by Jack to Kate in his Will. As there is no gift from Tom to Kate, the seven year rule does not apply.
If you would like any further advice in relation to deeds of variation, we at Fisher Jones Greenwood are here to help. Please feel free to call us on 01206 700113 or email [email protected] to arrange a mutually convenient appointment.
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