Tax tip: Inheritance tax planning post death

The death of a client does not necessarily close the tax planning window.

Firstly if the will wasn’t adequately drafted or amended during the client’s lifetime any tax flaws can to a certain extent be ‘mended’ after death by judicious use of a deed of variation (DoV). A DoV allows the beneficiary of a legacy (specific or residual) under a will to give up that legacy in favour of a named person. If that DoV then contains a statement that IHTA 1984 s 142 is to apply the effects of variation are treated as having been provided by the will.

For example a DoV could be used by chargeable beneficiaries to divert assets inherited on death to the surviving spouse. A s 142 election within the DoV would therefore mean that those previously chargeable legacies would now qualify for the spouse exemption. The surviving spouse could...