How do I change the terms of a Will?
How a deed of variation may help you if you are dealing with a deceased person’s estate or are due to inherit
What is a deed of variation?
You will probably already be aware that when a person dies, their estate will be distributed according to the terms of their Will, or if they do not have a Will, the Intestacy Rules. You may however not be aware that it is possible to alter the way the estate is distributed and redirect a legacy or entitlement through a deed of variation. The benefits of this can be significant and may help to save inheritance tax. Of course, the person due to inherit must be in agreement with any such changes.
How to change the terms of a Will using a deed of variation
There are many different reasons why a deed of variation may be considered. This list includes, but is not limited to, the following:
- Making a provision for someone not included in a Will, such as a grandchild who had not been born at the time of the Will.
- Making a provision for someone not provided for under the intestacy rules, such as a non-married partner.
- Equalling out an uneven distribution between beneficiaries or providing for someone with greater needs than a beneficiary.
- Providing clarity on an ambiguous clause in a Will.
- Settling a dispute or dealing with a claim against the estate.
- Reducing inheritance tax by including a charity as a beneficiary.
- Reducing inheritance tax by altering the distribution so as to take advantage of one of the of the inheritance tax exemptions, such as the residence nil rate band (RNRB).
- Potentially reducing or eliminating inheritance tax on a beneficiary’s own estate as detailed below.
Reducing or eliminating inheritance tax on a beneficiaries own estate
One of the most common reasons why someone may consider a deed of variation is to reduce or even eliminate inheritance tax on their own estate. If a beneficiary does not need all or some of their inheritance, they may wish to give it to the beneficiaries of their own estate now through a deed of variation. This money would be treated as coming from the estate of the person who has just died rather than the beneficiary.
Any such variation would not count as a lifetime gift from the beneficiary and there would therefore be no requirement for them to survive the seven years for it to be inheritance tax exempt.
Who can benefit under a deed of variation?
Anyone can benefit under a deed of variation. They do not need to be already named in the will, or even related to anyone in the will.
What are the requirements of a deed of variation?
The most important thing to note is that a deed of variation must be prepared within two years from the death of the deceased. There are other fairly strict criteria that must be adhered to and it is also very important that everyone involved understands the implications. It may also be that consent is required from various other people, such as the executor of the Will. Therefore, if you are considering a deed of variation we would always recommend that seek legal advice first.