Pre-owned assets: exemptions: changes in the distribution of a deceased’s estate
Any disposition made by the chargeable person in relation to an interest in the estate of a deceased person is disregarded for the POA charge if under IHTA84/S17 (IHTM04151) the disposition is not a transfer of value by the chargeable person for Inheritance Tax purposes. All dispositions covered by IHTA84/S17, including disclaimers and variations where the provisions of IHTA84/S142(1) apply are exempted from the POA charge by FA04/Sch15/Para16.
For the purposes of this paragraph ‘estate’ has the normal meaning for Inheritance Tax (IHTM04043).
Wendy is bequeathed a house in her husband’s Will, which she occupies. She executes a deed of variation (IHTM35011) within two years of her husband’s death altering the terms of the Will so that the house passes to her son instead. The deed of variation meets the provisions of IHTA84/S142(1). Although she continues to occupy the house the POA charge will not apply.
FA04/Sch15/Para16 will also apply if the deed had merely changed Wendy’s absolute interest in the property to an interest in possession, with her son as remainderman. If her life interest is terminated during her lifetime (but more than two years after her husband’s death) and she continues to occupy the property the POA charge will not apply.
If Wendy’s life interest was terminated on or after 22 March 2006 and she continues to occupy the property, the reservation of benefit provisions will apply by virtue of FA86/S102ZA and so the exemption under FA04/Sch15/Para11(3) will apply (IHTM44044).