Do Not Lose The Key Tax-Planning Tool, Says Kent Lawyer

22 March 2007

In what looks like his last Budget, Chancellor Gordon Brown has predictably targeted people anxious to avoid tax but he’s left one stone unturned, says Kent lawyer Harvey Barrett – the deed of variation.

Harvey, head of the private client department at leading south east law firm Furley Page, commented: “I am surprised that once again the Chancellor has ignored one of the most versatile, cost-effective and convenient tax-planning devices available.

“One possible reason is that the circumstances for using it are limited. Effectively, the taxpayer has to have inherited assets from someone who has died within the past two years. Once that period has expired it’s too late to take advantage so the message is clear - use it or lose it!”

Under a deed of variation a person either agrees to give away inherited assets to another individual or to have them transferred to a trust for the benefit of themselves and others.

Harvey explains: “Imagine you are 55 with a property worth £350,000. A relative died six months ago leaving you a considerable sum of money - say £285,000 net of inheritance tax. By the time you die that sum will have increased in value but for argument’s sake suppose it hasn’t? Assuming you leave all your estate to your children, the additional tax that would be payable as a result of inheriting the £285,000 would be £114,000.

“By making a deed of variation your relative’s Will can be varied so in reality it becomes a trust. You and your family can be trust beneficiaries receiving income for the rest of your lives – as a pension, if you like. And the good news is, it won’t be taxed as part of your estate. After your death your children can treat it as their own pension, in turn escaping all inheritance tax on their deaths.”

A trust can last as long as 80 years – passing from generation to generation – and providing it never exceeds the nil rate band there won’t be any inheritance tax to pay.

A trust also helps ring fence trust assets against claims by divorcing spouses or civil partners – as well as claims by creditors, says Harvey. And it helps to preserve these assets should the principal beneficiary need to go into a nursing home and the local authority wants them to make a significant contribution towards fees.

For more information contact  Harvey Barratt
or call on 01227 763939.

‹ Back

• © Furley Page LLP 2008
• | LLP
• | Terms and Conditions
• | Privacy Policy
• | Site Map
• | Accessibility