A Deed of Variation is normally used to refer to post-death variations or rearrangements of Wills, intestacies (where someone has died without a Will) and other plans taking effect on death.
In simple terms, the original beneficiary can sign a Deed of Variation in order to make a gift and to redirect all or part of an inheritance.
There are many reasons why it may be desirable to redirect an estate, for example, to balance the differences in the finances of the beneficiaries (perhaps from a wealthy sibling to a poorer one) or to pass the inheritance on to the next generation rather than swelling the estates, which will be taxable, of wealthy parents to struggling grandchildren.
Alternatively, skipping a generation or making a Discretionary Trust are ways in which Deeds of Variations can be used to alter the Will of a deceased to reduce Inheritance Tax liability.
Choosing to vary the assets into a trust, may ensure that the assets are protected for generations to come whilst still allowing you access to the assets to use as you wish and protecting them against risks such as:
If a Deed of Variation is to take retrospective effect for the purposes of Inheritance Tax and/or Capital Gains Tax, the Deed must be completed within two years after the death and contain the appropriate tax statements. HMRC will then treat the gift as having been made by the deceased person and not by the original beneficiary.
It is not possible to carry out more than one variation in relation to the same asset, but several variations in relation to different parts of an estate are possible. A Deed of Variation can be effected even if the administration of the estate has been completed and assets have been distributed.
A Deed of Variation can present a major tax planning opportunity. It should be considered in virtually all cases. If you require further information, please contact Adam Scott or Geoffrey Billington at Humphries Kirk LLP Solicitors Bournemouth office on 01202 421111.