7th June 2019
I have received an inheritance which I do not wish to keep. What can I do?
As strange as it may seem, there may be circumstances where you might not want assets or monies left to you in a Will. In this situation you have a right to refuse the inheritance. There are two methods to remove inheritance from your hands. They have very different implications.
One method would be to gift the monies or assets. From an inheritance tax (IHT) viewpoint seven years needs to elapse before the value of the gift (at its value when made), is outside of your estate for the purposes of IHT on death. There can be additional IHT implications either if you have made gifts or transfers into trusts beforehand or, if the gift is over a certain size. Provided the gift is made promptly after receiving it, there should be no capital gains tax (CGT) implications for you. There will be no adverse income or CGT implications for the recipient provided the recipient is resident in the UK.
There can be implications if either you or the recipient receives means tested benefits. These adverse implications will occur if the gift is made outright to the recipient rather than through some form of appropriate trust.
The other route is to vary or disclaim the inheritance. With a variation, you have the ability to redirect the inheritance to the persons in the manner in which you wish to see it redirected. This could be an outright variation or it could be a variation into some form of appropriate trust for the recipient. From your IHT viewpoint, the variation or disclaimer is not seen as a potentially exempt transfer nor indeed a chargeable transfer and therefore no seven year survivorship period is required. The key difference between a variation and a disclaimer, is that with a disclaimer, the inheritance goes back into the pot whether that be the Will or the provisions of intestacy and is then distributed according to those provisions i.e. without your steer as to where it passes. Disclaimers have the same IHT implications as variations and the same CGT implications.
Neither variations nor disclaimers work for preserving means tested benefits, so if you are getting means tested benefits and vary or disclaim, the asset will still be seen as yours and will have an impact upon your entitlement. Again, as far as the recipient is concerned, it depends whether it is an outright gift, a gift to an appropriate trust or a gift to an ‘inappropriate’ trust.
For more detailed information, please contact Edward Walter, Solicitor at Buss Murton Law LLP on T: 01892 502 320 or E: firstname.lastname@example.org
This article was first published in the June 2019 edition of Index Magazine https://www.indexmagazine.co.uk/