Many people don't realise that after the death of a loved one there is a legal process which allows them to redistribute all or some of the assets left to them in a Will.
If they are a beneficiary and want to do this for Inheritance Tax purposes or to include someone who wasn't named as a beneficiary in the Will, they can do so by using what is known as a Deed of Variation.
Below we look at exactly what this involves and what the circumstances are that would lead to taking out a Deed of Variation.
What is a Deed of Variation?
A Deed of Variation is a legal document that allows the beneficiaries of an estate to rearrange the distribution of assets left to them in a Will or under intestacy laws.
In other words, a Deed of Variation is a way to change the terms of a Will after the death of the testator (the person who made the Will) in order to redirect some or all of their inheritance to other beneficiaries.
Why would I apply for a Deed of Variation?
People apply for a Deed of Variation for a variety of reasons, amongst the most common are:
- To reduce the amount of inheritance tax owed by the estate
- To ensure that the estate is distributed fairly among all beneficiaries
- To provide for someone who was not named in the original Will
- To include a charity as a beneficiary
To be legally valid, a Deed of Variation must be signed by all affected parties and must comply with the relevant laws and regulations in the jurisdiction where the Will was made, for our purposes this would be in England and Wales.
It is important to mention that before applying for a Deed of Variation you should seek professional advice from ourselves or a solicitor to ensure all of the implications such as Inheritance Tax are thoroughly considered and that the administration of the Deed is performed correctly and legally.
Who can apply for a Deed of Variation?
In general, any beneficiary named in a Will or who would inherit under intestacy laws can apply for a Deed of Variation. This includes:
- Beneficiaries who wish to redirect their inheritance to other beneficiaries or to charity.
- Beneficiaries who wish to vary the amount of their inheritance.
- Beneficiaries who were not named in the original Will but who have a claim to the estate under intestacy laws.
- Executors or administrators of the estate who wish to rearrange the distribution of assets.
Restrictions on making a Deed of Variation
In England, the relevant laws governing Deeds of Variation are set out in the Inheritance Tax Act 1984, as amended by the Finance Act 2005 and there are some restrictions on who can make a Deed of Variation. For example, beneficiaries who are not UK residents or who are subject to certain tax regimes may not be able to make a Deed of Variation.
It is also important to note that there are time limits for making a Deed of Variation. In general, it must be executed within two years of the date of death of the person who made the Will.
Make sure you get professional tailored advice from the Savigny team or a solicitor to ensure you are eligible, are within the specified timescale and to get all the details correct.
What are the Inheritance Tax implications?
Every Deed of Variation will of course be different; however, some general rules can be applied so for example if the Deed of Variation affects the distribution of assets subject to Inheritance Tax, it may be necessary to notify HMRC within certain time limits.
This is because a Deed of Variation can have implications for the Inheritance Tax liability of the estate, and HMRC needs to be notified of any changes to the distribution of assets in order to determine the correct amount of tax owed.
Ensure you receive a kind, understanding service
A Deed of Variation is far less complicated than it might at first seem, but for many newly bereaved families it can seem a little daunting.
We fully understand that making decisions about redistributing a loved one's assets and perhaps changing their wishes or intentions can be a challenging step. That is why you will always receive a sympathetic hearing, where we take the time to fully understand what you wish to achieve and offer advice and practical help on the best way to fulfil your needs.
We believe that everyone should be treated with respect and kindness receiving a caring personal service. We take the time to understand your needs and provide the professional experience, knowledge, skills and guidance to help you make the decisions that are right for you.
If you have any questions about Deeds of Variation or any other aspects regarding the administration of the estate of a loved one, please contact Savigny Will Writers using the details below.