What is a Deed of Variation?
A Deed of Variation allows beneficiaries of a Will to make changes to their entitlement to benefit from an estate after someone has died. Some of the reasons for completing a Deed of Variation are:
- Saving inheritance tax (IHT) payable on the estate by taking advantage of otherwise unused IHT exemptions.
- As a tax planning measure for the beneficiary by passing some of his or her inheritance onto the next generation.
- Resolving family disputes or to include children or grandchildren born after the Will was written.
The effect of a Deed of Variation is to treat the new beneficiaries as if they had been included in the original Will. Legacies are therefore received from the estate and not as a gift from the beneficiary who is redirecting his or her share of the estate.
It is also possible to execute a Deed of Variation when someone dies intestate ie without leaving a Will. This might be for one of the reasons already stated or to make provision for someone excluded under the intestacy rules eg an unmarried partner.
In order for a Deed of Variation to be valid, it must be executed within two years of the date of death, contain the appropriate tax elections and be properly executed. More than one Deed of Variation can be made in relation to an estate but the same asset can only be the subject of one variation.
If you have any queries about Deeds of Variation, or any other estate planning matter, please contact us.
Peter Gooch is the Probate and Trust Manager at Barker Gotelee, Solicitors in Suffolk.