Are you a beneficiary but want to make changes to your inheritance?
Maybe you are not sure where to start, or maybe you are uncertain if changes to your inheritance are allowed in law.
In the realm of estate planning and inheritance, a legal instrument called a deed of variation plays a significant role.
This document enables beneficiaries and inheritors to modify the distribution of assets or alter the terms of a will after the testator's passing.
In this article, we will delve into the intricacies of deeds of variation, shedding light on what they are and the advantages they offer.
What Is A Deed of Variation?
A Deed of Variation - also referred to as a deed of family arrangement or deed of disclaimer - serves as a posthumous mechanism for modifying the way assets are distributed among beneficiaries.
Its primary purpose is to enable the redirection of assets or changes in distribution to align with specific objectives.
The legal document consists of two parts.
The first strand allows you to set out what you would like to gift and to whom. The deed will allow you to vary what you have been entitled to from someone else’s will.
The second part deals with the reading back of inheritance. HMRC will regard anything that is gifted as if it came from the person who has died and not the person that is giving the gift.
Whilst you cannot change a will in law, you can make changes to your entitlement. The reasons you may want to do this could include:
- Allowing someone else to benefit from your inheritance.
- Making a charitable donation.
- Including your children or grandchildren who may not have been born when the will was written.
- Equalising assets among your family.
- Finding a more tax-efficient way to distribute the estate.
Benefits of Using A Deed of Variation
The benefits of using a deed of variation are that you can make the changes to your portion of the estate in terms that are as simple or as complex as you wish.
The person or people that you choose to benefit do not have to be named in the will already. Deeds of variation allow flexibility.
You can only change your own entitlement, but you can use a deed of variation to benefit everyone in the estate. This could mean that all the beneficiaries may decide between themselves how each of them can alter shares.
Even if you have already received your inheritance, you can still draft a deed of variation.
It does not matter if you have already given money to the next person, you can still draft a deed of variation.
A deed of variation can still be drafted if the original beneficiary has passed away. This can be useful where adding the original beneficiary’s inheritance to the original beneficiary’s own estate means that there would be Inheritance Tax to pay.
What Could Stop You From Making A Deed of Variation?
There are several factors that could potentially prevent someone from making a deed of variation.
Here are some common situations that may act as obstacles:
- If the original beneficiary is either bankrupt or insolvent.
- If the original beneficiary is receiving care or likely to need care in future. This may seem a strange concept, how do you know if you are going to need care? The best example is if the original beneficiary has been diagnosed with dementia.
- If the original beneficiary is getting divorced or dissolving their civil partnership, as the court will treat the inheritance as part of the couple’s total assets.
- You cannot change the inheritance of other people without their consent.
- You cannot give yourself a larger share of the estate unless it is gifted to you.
- There are no changes allowed to named executors or guardians.
- There is a two-year restriction from the date of death.
- If the original beneficiary is not mentally capable, a court application will be needed.
It's important to consult with a qualified legal professional who specialises in estate planning and inheritance laws to understand the specific circumstances surrounding your situation and determine whether a deed of variation is a viable option.
They can provide guidance based on the applicable laws and assist in navigating any potential obstacles.
Why choose Monan Gozzett LLP?
The Head of Private Client at Monan Gozzett LLP is Mr Stephen Sampson.
As a member of the Society of Trust and Estate Practitioners (STEP), Solicitors for the Elderly and The Law Society’s private client section, Stephen is well placed to advise you on all aspects regarding deeds of variation.
Stephen’s approach is caring, pragmatic and holistic, with a special skill for making complex issues easily understandable.
Find out more about how we can help with Deeds of Variation, or contact Stephen and his team today for a confidential discussion.