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A legal document that allows beneficiaries to change how assets in a person's estate are distributed after their death. It effectively rewrites part of the Will (or intestacy rules) for tax and other purposes. The changes are treated as if they were made by the deceased person.
The same principles apply where no will is left and you are inheriting under the intestacy rules.
Another term often used for beneficiaries varying entitlements after death is a deed of family arrangement.
If you are considering a Deed of Variation for an estate you are involved in, we strongly suggest that you seek independent legal advice, as the implications can be significant. If you want more information on changing a will after death, contact us today.
Yes, all beneficiaries affected by a Deed of Variation must agree to the changes.
For the variation to be valid, all affected beneficiaries must sign the document. This is because the variation changes the original will and affects the rights of all involved parties.
If a beneficiary refuses to sign, the Deed of Variation cannot be implemented, and the original will will stand. It's important to ensure that all beneficiaries understand the implications of the variation and agree to it willingly.
There are 5 main reasons in our experience :-
For Inheritance Tax reasons - Consulting with a qualified tax advisor or solicitor is essential. The executor must inform HMRC about the Deed of Variation to ensure accurate tax calculations.Providing for family members who were left out
Redirecting assets to skip a generation (e.g., straight to grandchildren)
Protecting assets from care home fees or divorce
Where some or all of the gift is shares in a family owned business - a Deed of Variation may be used to restructure the deceased's estate to potentially qualify for Business Property Relief (BPR), which provides a tax exemption on certain business assets, including property used for a business. By using a Deed of Variation, beneficiaries can look to ensure their inheritance qualifies for BPR.
There are often quite specific reasons, including those we detail above for a deed to be needed. There are other possible alternatives including :-
Disclaiming your entitlement – this does mean completely disclaiming your entitlement and also not being able to decide who will benefit in your place.
Gift away your entitlement – this will constitute, for Inheritance Tax (IHT) a Lifetime gift. If you survive for at least 7 years after making the gift it becomes fully inheritance tax free.
To be legally valid the deed of variation must be in place within 2 years of the death and will need to comply with the Inheritance Tax Act 1984 and the Taxation of Chargeable Gains Act 1992.
Key points include requirements that :-
The deed must clearly set out the variations.
The deed must be signed by any of the beneficiaries who are losing some of their entitlement.
The deed must be signed by the executors if the variation will increase liability for Inheritance tax.
The deed must be signed by executors if the Variation increases the Inheritance Tax payable.
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