Changing the terms of a Will after death
A deed of variation can be used to vary the terms of a Will after death when a beneficiary or beneficiaries wish to transfer part of their entitlement to another person or organisation, such as a charity.
As long as it is within two years of the death, a deed of variation can be put in place and it can be a useful tool to help reduce Inheritance Tax (IHT) and Capital Gains Tax (CGT).
Why would you need to change a Will after death
As a beneficiary, there are a number of reasons why you may wish to change the way an estate is distributed. For example:
- The Will may not handle the estate in the most tax efficient manner,
- The deceased may have failed to update their Will following a change in circumstance which has led to someone not benefitting,
- The terms of the Will may mean the estate will be distributed unequally or unfairly between the beneficiaries,
- To clarify any uncertainties about the contents of the Will, or
- If no Will has been written and the rules of intestacy will not create the best outcome for beneficiaries.
If a person is excluded from a Will, and can potentially make a claim against the estate, a deed of variation can be prepared as part of a settlement agreement. This can be done without the need to go to court.
Any beneficiary who sees a reduction in their share of the estate’s value must agree with the changes – if these are children or unborn beneficiaries then the variation will need to be approved by the Court. If a legacy provision in a Will is to a discretionary trust in relation to a minor, no variation can be made without Court approval as trustees are unable to give consent to the variation.
Although the Government’s website says that a letter is sufficient to vary the terms of a Will, it is sensible to create a correctly drafted deed and witnessed as there are many conditions which must be met for the deed of variation to be valid and legally recognised.
Deed of variation for tax purposes
For estates valued at above £325,000 (and when the nil rate residence band has been applied), anything above the exempt amount will be taxed at 40%.
Without practical estate planning to mitigate IHT beneficiaries may find that they will be required to pay more in tax than is necessary. If all beneficiaries agree, a deed of variation can be created to change the way the estate is distributed and this can reduce the amount of tax payable. However, if this occurs, HM Revenues & Customs (HMRC) must be informed (a copy of the deed of variation and an Instrument of Variation checklist form IOV2 must be completed).
If you feel, as a beneficiary, that a deed of variation may be beneficial to you or the estate in respect of tax planning, then contact Wellers specialist solicitors to ensure that the most suitable and practical solutions are put in place for your personal situation.
Important notes on deed of variation
It is crucial to understand that a deed of variation is not a carte blanche to change the wishes of the deceased. Under section 142 of the Inheritance Tax Act 1984, the law that enables deeds of variation to be made, beneficiaries are allowed to “vary” a disposition, or, in other words, to decline benefit as if it had never been granted.
It is not possible to use a deed of variation to appoint executors or make other types of provision.
Why Choose Wellers
Wellers specialist team of solicitors can provide practical, actionable solutions in relation to Will writing and Will trusts, succession and estate planning, and associated tax implications.
If you would like to discuss a deed of variation or any Will and inheritance issue, contact us on: