Rearranging Your Inheritance & Deeds of Variation | Curtis Parkinson
Rearranging Your Inheritance and Deeds of Variation

Rearranging Your Inheritance & Deeds of Variation

A deed of variation is not a euphemism for rewriting someone’s Will after they’ve died. It’s a document that legally allows the beneficiaries some flexibility to rearrange their inheritance or change the distribution of the estate.

This device, sometimes known as a deed of family arrangement, can be useful if a Will doesn’t take account of changed family circumstances, personal wealth or inheritance tax law.

Potential Benefits

An inheritance from a parent or other relative when you are older can be a welcome financial cushion or a chance for you to help your children.

By making a deed of variation, for which there is a two-year window from the date of the original death, you can make sure the value you have inherited by-passes your estate.  You can pass on some or all of your inheritance or keep it in a trust from which you and other family members can benefit as and when you decide.

A properly drawn up deed of variation means that the usual rules about having to survive seven years from making a gift and not being able to benefit from what you have given away do not apply.

Equally, a deed of variation can also help to clear up any uncertainty in a Will, equalise distribution between beneficiaries or make tax-free gifts to charities, otherwise left out. Also, if 10% of the value of a person’s estate passes to charity, the remainder of the estate may benefit from a lower rate of inheritance tax (IHT).

Requirements

The document must clearly state how you want to distribute your inheritance. You can’t stipulate what happens to other’s share of the estate. In summary:

  1. All beneficiaries affected must be over 18
  2. All beneficiaries affected must mutually agree to the changes
  3. Beneficiaries can’t receive compensation for anything they may lose

This HMRC checklist will also help you to establish whether your situation will meet the legal requirements.

Permitted Variations

Changes may be simple or complex and commonly include:

  1. Reallocating specific assets to specific individuals
  2. Reallocating your entire inheritance
  3. Setting up a trust

Variations Not Allowed

You are not able to:

  1. Make changes to someone’s inheritance without their agreement
  2. Increase your share of the estate (unless all beneficiaries agree to this)
  3. Make changes to named Guardians or Executors
  4. Deliberately deprive yourself of assets for means-tested benefits or care fees

Considerations

All the beneficiaries must understand the consequences of making changes. Increasing the share in favour of one person and reducing another may have an impact on IHT liability. Lack of clarity may lead to disagreement and ultimately, a dispute.

Variations can either be made before or after the Executor(s) get the Grant of Probate. Also, beneficiaries must make the changes within two years following a person’s death.

The cost of drawing up a deed of variation will vary according to the complexity of the changes and the number of beneficiaries involved. However, depending on your situation, making changes to the Will could potentially save many thousands and protect the ones you love.

It’s important to note that once beneficiaries make variations, decisions can’t undo. Furthermore, in relation to tax advice, you should always consult a chartered accountant. They will explain the tax implications in full, be they inheritance tax (IHT), capital gains or income tax-related. This HMRC checklist is helpful in determining whether your situation satisfies meets the legal requirements.

No Will

If a person dies without a Will (intestate), beneficiaries can make a deed of variation. However, the same rules apply. All beneficiaries who stand to inherit under the laws of intestacy need to agree with any changes in writing.

The situation can be particularly complicated if there are minor or incapacitated beneficiaries when a court application and permissions will be needed.

Our Advice

Our specialist lawyers have many years’ experience advising clients about all aspects of Wills, Trusts & Estate Planning. If you need further advice or information about altering the distribution of an estate or would like a quotation, please contact us. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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