A Deed of Variation is a document that changes how assets are distributed in someone’s Will after they have passed away. It can be very useful for Inheritance Tax planning purposes such as passing inheritance down to the next generation.
Whilst the document may seem helpful there can be unforeseen tax consequences if not handled correctly.
Jonathan Gallop, Head of Wills, Trusts and Probate, outlines all you need to know about putting the document together.
Do I need a Deed of Variation?
If you are a beneficiary of an estate, you may wish to enter a Deed of Variation to redirect your inheritance to other members of the family who are less well provided for. For example, you may wish to pass some, or all, of your inheritance to your children. If dealt with correctly, a Deed of Variation can create significant tax benefits.
If you make a gift of your inheritance without entering a valid Deed of Variation, then you may create adverse tax consequences and lose out on tax benefits. It is advised to seek expert legal advice to help you understand the rules and restrictions around this.
When can I make a Deed of Variation?
You can make a Deed of Variation either before or after a Grant of Probate has been issued. The document allows the original beneficiary to redirect their inheritance to another individual, charity or trust. If you are creating a Deed of Variation for Inheritance Tax or Capital Gains Tax purposes, then it must be signed within two years of the date of death in order to be effective for tax purposes.
Can a Deed of Variation be cancelled?
Once the changes are made, they cannot be revoked. You will need to carefully consider that all details are correct to avoid costly consequences
Are there any alternative options?
1. Lifetime gifts: The beneficiary can make a gift to the new beneficiary once they have received their inheritance. However, if the original beneficiary passes away within seven years of making this gift, the value of the gift would be added to their estate for inheritance tax purposes. Therefore, advice should be taken before doing this.
2. Disclaiming your interest: In some circumstances, the beneficiary may wish to disclaim their interest in the estate. Again, do seek advice before you choose this option.
How Blaser Mills Law Can Help
If you are considering a Deed of Variation, it is essential to get in touch with a solicitor first. Using a solicitor can ensure any potential issues in the future are considered and you are not faced with any costly mistakes.
For any further information or advice please get in touch with the Wills, Trusts and Probate department on 01494 781362 or by email at cad@blasermills.co.uk.