A deed of variation is used to vary a will and must be signed within the two years of the date of death. This gives the family an option to vary the will of a family member. The deed must be agreed by those left worse off by the changes.
Why use a deed of variation?
When a deed of variation is used, the changes to the will can help to, for example, reduce the amount of inheritance tax payable, provide for someone left out of the will or move the deceased assets into a trust. The deed of variation can also be used to change the entitlement under the rules of intestacy. If the liability to inheritance tax of the estate changes as a result of the deed of variation then a copy must be sent to HMRC.
Here are some examples of situations where a deed of variation has been used to good effect:
Robert Smith is recently deceased and under the terms of his will his estate passes directly to his spouse, Ruth. There is no inheritance tax payable as it is covered by the spouse exemption. In his estate is a legacy due from the estate of another family member, his mother Ruby. It is a good planning exercise to review if the legacy can bypass the Robert’s estate and by deed of variation pass directly to their children for example. Therefore, this legacy will not be subject to IHT on the passing of both Robert and Ruth and the value of their estates will be reduced by this amount.
David Jones has recently passed away and his will directs that his estate be split between his daughter, Deidre and her children. A deed of variation was prepared as Deidre did not require the amount of her legacy and would rather it passed to her children as they were of an age when it could be useful to them. The proportions were updated via a deed of variation so instead a greater share was directed to her children.
Barbara Brown has recently died and in her will the estate passes directly to her husband, Bernard, so there is no inheritance tax payable on Barbara’s death. A deed of variation was suggested up to the nil rate band. This can be done by varying the will so a proportion of the family home passes to their only daughter, Sarah. Thereby Bernard’s estate in the future, is reduced by this amount plus the increase in value of this share of the family home.
Our private client advisory specialists advise clients and their families on the considerations around IHT planning including the use of deeds of variation. If you would like to discuss your situation please contact us for further advice.