IHTM35026 - Published guidelines: examples where the destination of property must be varied

Example 1 - redirection of a cash sum

Where the subject-matter of the redirection is expressed as a cash sum (whether or not it is described as a legacy) it will be payable out of or will inevitably impinge on the amount or value of the interest of the legatee(s) or intestate successor(s) making that monetary provision.

You may accept the instrument as a redirection of the property comprised in the death estate up to that amount or value, or total amount or value where more than one such sum is involved. It does not matter that, at the death, there were insufficient liquid assets (for example cash in hand or at bank) to provide that amount.

However, an effect of IHTA84/S39A ( IHTM26101) can be due for a gift which is defined in terms of a cash value, but during administration, the gift may be satisfied otherwise than out of the relievable property. It is therefore possible for there to be an ostensible variation, for example, by providing that a sum of money is to be paid out of relievable property) without any change actually occurring in the administration of the estate. You should refer any such case to TG before commenting on the effectiveness of the Instrument.

Example 2 - property not in the estate on death

It is possible that the subject-matter of the redirection is property which cannot be identified as forming part of the estate immediately before the death. For example, shares which may have been acquired by way of exchange or capital reorganisation of the company.

Where this applies, you should ask the taxpayer for an explanation of the discrepancy and, on receipt of their replies refer the case to TG.

Example 3 - a lesser proprietary interest is redirected

Where the subject-matter of the redirection is some lesser proprietary interest than the property comprised in the deceased's estate, (for example, a lease carved out of a freehold interest), you should refer the case to TG.