What is a Deed of Variation?
Normally when a person dies, their executors would be responsible to call in their assets, pay their debts and distribute their estate according to the terms of their will or if there was no will then distribute under the laws of intestacy.
There is a provision by way of a Deed of Variation, whereby the beneficiaries of an estate may wish to vary the terms of the will or rules of intestacy to modify their entitlement in the estate. There are many reasons for them wanting to do this.
Why change someone’s will after their death?
The beneficiary has a time limit of two years from the date of death to vary the Will or intestacy rule. The common reasons why someone would want to vary the share that they would receive are:
- Tax planning opportunities may arise by leaving a larger share to a spouse or charity.
- The will does not equally distribute the estate and all the parties agree that it should be shared equally or if not equally, in other proportions.
- If a will was not updated to reflect the current position. For example, there is a new member of the family, a child or grandchildren that was not included when the will was first drafted.
- If the will had provisions that were ambiguous or there were uncertainties then this could be put right.
- If there was no will and the distribution under the intestacy rules was not right for the family then it can be adjusted for example to include the partner of the deceased.
Requirements to make a Deed of Variation effective
- It is a legal document and must be in writing.
- As mentioned above the time frame for completing the document is two years from the date of death.
- The share or gift that is being altered must be clearly identified and described in the Deed.
- The Deed has to be signed by all the beneficiaries who are disadvantaged by the change in the distribution.
- The person who is reducing his or her share of the estate must not receive any payment privately for reducing his/her share.
- The Deed must contain a statement of intent for tax purposes.
- A beneficiary who is under the age of 18 years would not be able to give effect to a variation of his or her share, nor could his parents execute the Deed on their behalf. Under these circumstances the court would need to approve.
In essence, the beneficiary of the estate can alter or redirect his or her share in favour anyone else that they would wish to receive this amount even though the new person was not mentioned in the will. An example of this is if an older person was to receive a large amount from someone’s estate. This would swell up their own estate and may trigger inheritance tax. If they executed a Deed of Variation so that the share that they have inherited can bypass them to someone else e.g. their grandchildren the whole amount can be received tax-free.
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