Being left a gift in someone’s will, whether it be property, shares, or a cash sum, comes with mixed emotions. You will often be feeling bereaved for the deceased person and whilst the bequeathed gift may be a welcome boost to your finances, it can sometimes bring issues.
For one reason or another, you may feel it necessary for there to be an amendment in the distribution of gifts as laid out in a person’s will. In such circumstances, a Deed of Variation might be the way forward.
A Deed of Variation enables the Beneficiaries of a deceased person’s Estate to alter the distribution of the Estate. This legal document can be used by one Beneficiary to redirect their share of the Estate, or by all of the Beneficiaries jointly to alter the distribution of the entire Estate.
A Deed of Variation must be completed within two years of the date of death and all of the Beneficiaries who wish to vary the distribution of their gifts must be over the age of eighteen years and of sound mind. If any of the Beneficiaries are aged under the age of eighteen years it may still be possible to complete a Deed of Variation but an application will have to be made to the Court for consent.
When a Deed of Variation has been entered into it is treated as though the deceased person made the gift in their Will for Inheritance Tax and Capital Gains Tax purposes.
Why you might want to consider a Deed of Variation:
- Reducing the Inheritance Tax payable (for example by redirecting some of the Estate to Charity or the surviving spouse, as any gifts to Charity or spouses are exempt from Inheritance tax).
- Inheritance Tax planning for the Beneficiaries. If any of the Beneficiaries will already have a liability to Inheritance Tax upon their deaths they may elect to pass their share of the Estate to their children (either outright or into trust).
- To give effect to the wishes of the deceased. Sometimes people’s wishes change after they have made a Will and they may not have had time to alter it. The beneficiaries could give effect to those wishes by drawing up a Deed of Variation.
- If there is an unequal division of the Estate a Deed of Variation could be used to balance the shares given to a brother and sister, for example, so that they each receive the same share of the Estate.
- To incorporate a Trust to protect a disabled Beneficiary.
Please note that although Deeds of Variation can be an extremely useful tool, they should never be relied upon as a way of Estate Planning. There is no guarantee that the effectiveness of Deeds of Variations won’t be reduced or even removed by a government in the future.
For more information or advice on Deeds of Variation and their use, please do not hesitate to get in touch. Myself and Farleys’ team of experienced wills and probate solicitors would be happy to help.