What is a Deed of Variation in England and Wales?
16) What is Deed of Variation of a Last Will and testament?
A deed of variation is a way of changing a Last Will and testament AFTER someone has died. Why would you want to do that?
The most common reason is that a parent in maybe their 80’s or older dies, and leaves their estate to children who are well off and maybe even retired. Inheritance tax may already have been paid on the parents estate and the 60 year old “kids” don’t really need the money. If they die with the extra cash, it will probably all be liable to Inheritance Tax at 40% (again) before the 40 year old grandchildren or even the 20 year old great grandchildren get anything.
So the sensible thing to do is for the 60 year old kids to pass the money on. But if they do that and die within 7 years, there will be a big extra tax bill. This is where the Deed of Variation comes in.
Provided all the beneficiaries whose shares in the Last Will are affected agree, and are over 18, we can organise a Deed of Variation to move the cash down one, two or even three generations to the folk who actually need it.
It is also possible, at rather more cost, to get even more advanced and move the cash into a Family Bank trust which can go on looking after generations of the family for up to 125 years – the Family Bank can also continue to cut Inheritance Tax during all this time – ask us for details. Or the Trust can act as a Charity if you prefer.
Remember I mentioned that all the AFFECTED beneficiaries had to agree? If there had been two children in this case, each receiving half, then one of the (60 year old) children could have asked us to prepare a Deed of Variation – of their share – even if the other did not wish it to happen.
A Deed of Variation can potentially save Capital Gains Tax and or Inheritance Tax in some circumstances – fill in the enquiry form and we’ll be pleased to advice.
Complications with Deeds of Variation.
- If any negatively affected beneficiary is under 18 or mentally incapacitated, then Court approval is needed – which sadly puts the cost up substantially, but they are peanuts compared with the potential savings in many cases. Fill in the enquiry form to the right if it may be relevant.
- The Deed of Variation must be absolutely finished within 2 years of the date of death. 5 minutes late, and there are no tax benefits at all, so the earlier you contact us the better.
A deed of variation of Intestacy is exactly the same as a deed of variation of a Will – except that the person died without a Last Will. So what the Deed of Variation is changing is where the cash goes under the Rules of Intestacy (click the link above for more information on Intestacy.) Once again, any one who loses out must agree, and exactly the same rules and time limits apply to any Deed of Variation.