IHTM06035 | General procedural matters: Instruments of variation and excepted estates

There are two circumstances where an Instrument of Variation (IoV) (IHTM35011) can have an impact on an excepted estate.

Instrument of Variation (IoV) executed before grant

Where an IoV is executed before the grant of representation is obtained, the personal representatives may apply for a grant on the basis of the Will as amended by the IoV. This means that if an estate which was due to pay Inheritance Tax (IHT) is redirected so that part of the estate passes to the spouse or surviving civil partner and the chargeable estate is then below the IHT nil-rate band, the estate can qualify as an exempt excepted estate (IHTM06013).

IoV executed after a second death

Where two people, usually husband and wife or civil partners, die within two years of each other, the beneficiaries of the second estate can execute an IoV which redirects property from the first estate away from the second estate. However, this hypothesis only applies for IHT purposes. It does not alter the fact that in the real world, on the second death, that person owned the assets concerned. So, if the gross estate on the second death was more than the IHT nil rate band the estate cannot qualify as an excepted estate. The full value of the estate should be returned in the IHT400 with a deduction for the assets that are redirected being shown as a relief.