What is a Deed of Variation?
A Deed of Variation is a document which enables Beneficiaries to vary their entitlement under a deceased’s estate whether the deceased died with a Will or Intestate.
What is the effect of a Deed of Variation?
The effect of a Deed of Variation is such that the original beneficiary can redirect the legacy or entitlement to a third party.
Variations are made for a number of reasons such as ensuring that other family members have sufficient provision made for them where Intestacy situations arise.
They are also made to mitigate liability for Inheritance Tax. The Deed of Variation is written back into the Will or Intestacy for Inheritance Tax purposes as though the new gift had been made by the deceased.
For example, Grandmother dies and leaves her estate to her son, who is already independently wealthy and does not need all or any of the inheritance. The son then varies the gift in the Will in favour of his own children. This means that the inheritance will bypass the son and will never be taxed as part of his estate. The grandchildren will receive their inheritance sooner. If the son did not enter into a Deed of Variation but kept the inheritance, it would be taxed as part of his estate on his death, likewise if he had given it away to his children and died within 7 years of the gift.
Often a Deed of Variation of an estate will not change the amount of Inheritance Tax paid on the estate but it is a way of mitigating against future Inheritance Tax liabilities.
What are the requirements?
A Deed of Variation must be made:
Within two years of the date of death of the deceased
In writing by the original beneficiary
It is important to note that Deeds of Variation should not be relied upon as a means of deciding how your estate should be distributed for tax purposes as the rules relating to Deeds of Variation may change. It is important to get the Will right and up to date in the first place by obtaining professional legal advice.
For more information on Deeds of Variation, please call 033 3344 9606 or 033 3344 9616 and ask for our Wills and Probate department.