A Deed of Variation can be used by the beneficiaries to change entitlements under a Will or Intestacy (most commonly for tax saving purposes) – it allows a beneficiary to re-direct his or her gift for the benefit of another individual (avoiding the same money being taxed twice). This is to be completed within two years of the date of death.
There are many reasons why beneficiaries may wish to vary or redirect inheritances.
The main reasons are:
The main effect of a Deed of Variation is that the alteration made by the deed is treated as having been made by the deceased, and not by the beneficiary who has given up his entitlement under the Will.
A variation cannot be done without the consent of everyone likely to be affected by it or if the beneficiary is a minor (as they are not able to sign a deed). This would need consent of the court before it could be done and such consent is not readily given.
As an example, a gift of £100,000 after inheritance tax would see the beneficiary receiving £60,000. If that beneficiary passes away with an estate over the £325,000 nil rate band, the £60,000 inheritance would now be subject to a further 40% inheritance tax leaving just £36,000.
By varying the original will a beneficiary may renounce his or her share to an individual of their choice (children, charity, etc) and save the additional taxation that would likely occur.
It can be done at any time (before or after the Grant of Probate is issued), but if it is implemented to save Inheritance Tax or Capital Gains Tax, it must fulfil the following requirements:
A Deed of Variation can be done even if the administration of the estate has been completed and the deceased’s assets have been distributed.
We provide various services to help with obtaining a Deed of Variation as well as general estate administration. For more information or to speak to our Probate specialist please call 01722 410009.
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