Some individuals review their Wills regularly ensuring that they amend them to take account of changes in family circumstances, changes in the law or changes to their personal fortunes. However, others do not do this and when they die their Wills may not reflect their own wishes or the expectations of those they have left behind. Many more adults die without making a Will at all and in this situation their Estate’s will devolve in accordance with the rules of Intestacy.
Preparing a legally valid Will and ensuring that your Will is kept up to date is important and should always be prioritised, but unfortunately all too often after a loved one has died it transpires that this is not in fact the case. Hindsight is a wonderful thing and it is rare that anyone benefits from it; however Deeds of Variations are one of those very rare occasions. A Deed of Variation can be used by beneficiaries to change their entitlement under a Will or intestacy within two years of a death.
There are a number of reasons as to why a beneficiary may want to do this. Primarily a Deed of Variation can be used by beneficiaries to change their entitlement under a Will or intestacy for tax purposes. If a Deed of Variation is completed within two years of the Testator’s death then, as long as the strict legal rules are complied with, the variation takes place retrospectively. The gift is then read back as if it was made under the Deceased’s Will, or the rules of intestacy, for Inheritance Tax and Capital Gains Tax purposes. The effect is that it is as if the Deceased left their Estate direct to the new beneficiaries.
A beneficiary may also want to provide for an individual who they believe has greater need of funds than themselves. For example if a number of siblings inherit from their parents, a wealthy sibling may decide to reroute some of their inheritance to a less wealthy sibling or a charity. Alternatively, beneficiaries may decide that one of them deserves a larger share of the Estate, for example to recognise a greater role in the care of the deceased. Another reason to vary an Estate might be if the testator’s family circumstances have changed. It may be that they have a new grandchild who was not born when the Will was drafted.
Of course, the beneficiary who wishes to give up their entitlement to the Deceased’s Estate could always simply hand on their share of the Estate to another without making a Deed of Variation, however this would be classed as a gift and would be subject to the seven year survivorship rule. Failure to survive for this period would lead to the gift being assessed for Inheritance Tax as part of the Estate of the person who made the gift.
Deeds of Variation are subject to strict legal rules and are irreversible. It is therefore important to get professional legal advice before a Deed of Variation is used.
The expert lawyers in the Wills, Tax and Probate team at Enoch Evans LLP are based across two offices in Walsall and Sutton Coldfield. The team have a wealth of experience in advising upon and drafting Deeds of Variation. The team are also experts in providing bespoke Estate planning advice including how best to plan for and reduce the Inheritance Tax that will be due on death. The Department is accredited by the Law Society as members of its elite Wills and Inheritance Scheme (“WIQS”).