Doing a good deed
News that Deeds of Variation will not be removed or reformed by the government following the Chancellor’s Autumn Statement is very welcome. Deeds of Variation will continue to be valuable for estate planning. But how many of us consider these or even know about them, let alone know when we really should consider using a Deed of Variation?
Key Points
• Use a Deed of Variation to save paying unnecessary tax;
• Complete the Deed within two years from a death; and
• Take advice to check the suitability of a Deed of Variation.
What is a Deed of Variation?
A Deed of Variation is a document drawn up in order to vary the terms of someone’s Will after they have died. The Deed can be drawn up at any point after death has occurred but the potential tax benefits of using a Deed of Variation will only be available if the Deed has been signed by all parties before two years have passed since the date of death.
Why would I want to change someone’s Will?
Simply put, to avoid paying too much unnecessary tax. Perhaps you have inherited a sum of money that you don’t actually need and wish to pass on to children, charity or someone else. Of course, you could pass that money on yourself once you have inherited it. The risk in doing this is that the money will end up being subject to inheritance tax if you were to die within seven years of passing the money on. The worst case scenario is that inheritance tax could become payable twice in quick succession.
If an estate contains business assets, agricultural assets or gifts to charity then it is always worth considering whether a Deed of Variation will help save tax because of exemptions which may be available.
Do I need to change the whole Will?
No. You can only change the part that relates to the gift you receive. You don’t need to give up the entire gift either. For example, you might decide that you only need half of what you have been left. In which case, you can enter into a Deed of Variation to divert the other half to your intended beneficiary or beneficiaries.
Who needs to sign the Deed?
As the original beneficiary, you will need to sign the Deed and you will need to be 18 or over to do so. In many circumstances, it is advisable for the Personal Representatives (Executors) to sign the Deed and you should take advice on whether this is necessary.
What happens when there is no Will?
The estate will be divided in accordance with the intestacy provisions. These provisions are set down by the government and dictate who benefits from an estate where there is no Will. Even if there is an intestacy, you can still use a Deed of Variation. The same principles apply – if you benefit under an intestacy but want to change this then a Deed of Variation will allow you to redirect your inheritance.
What happens if I’ve received the inheritance already?
This is not a problem. A Deed of Variation can still be entered into, regardless of the fact that you have received your inheritance. Just remember that the Deed will need to be completed within two years from the date of death if you want to obtain the tax savings.
How do I know whether a Deed of Variation is right for me?
Every situation will be different and will depend entirely on your circumstances. Take advice on whether a Deed of Variation is tax efficient and suitable for your circumstances.
At GA Solicitors we are well placed to provide you with comprehensive advice on Inheritance Tax planning.
Our dedicated, qualified and understanding team will be pleased to meet with you. Many members of our wills, trusts and probate team are also members of the Society of Trust and Estate Practitioners and Solicitors for the Elderly.
Contact our Wills, Trusts and Probate Team on 01752 203500.
Matthew Rose, Associate