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Rosie Duplessis

Chartered Legal Executive - Brighton

Deeds of Variation

Deeds of Variation

As contentious Probate lawyers, we are often embroiled in heavily contested litigation in relation to will validity, Trust disputes and cases under the Inheritance (Provision for Family and Dependants) Act 1975.

However, not all instances of concerning legacies under a will (or following Intestacy Rules) will lead to litigation and lengthy Court battles. A less publicised facet of this area of law is the use of Deeds of Variation.

An area where we are witnessing an increased use of Deeds of Variation are those situations concerning siblings.

As discussed in our previous blog (Can I Challenge an Estate where there is no Will?) the Intestacy Rules do not provide for step-children, often leaving an uncomfortable situation between ‘blood’ and ‘step’ family. In other circumstances, one sibling has been left a lesser legacy in lieu of a life-time gift, or perhaps an uneven legacy was intended, but the Deceased never updated their will to give effect to the commonly accepted situation.

If this (or a similar circumstance) is encountered, and all affected parties agree, it may not be necessary to go to Court or incur large legal costs.

What is a Deed of Variation?

A Deed of Variation is a written document (in the form of a legal Deed), which effectively operates to alter the Deceased’s will, or replace the default distribution under the Intestacy Rules.  Once finalised, it will become the document of reference for the purposes of administering the Estate.

Relevant Time Limits

If drafted appropriately, a Deed of Variation can affect the tax position, creating the same effect as if the Deceased had made a will in those new terms.

In order for the Deed of Variation to affect Inheritance Tax and Capital Gains Tax, it is important that four conditions are met:

  1. it must be made within two years of the date of death
  2. it must be in writing (a Deed is the usual form)
  3. it must not be for money or money’s worth
  4. it must include a statement of intent for the rewriting effect to apply for Inheritance Tax and Capital Gains Tax

Who has to sign a Deed of Variation?

The Executor/s of the Deceased’s original will (or Administrator if there was no will), must be a party to the Deed of Variation if the Deed of Variation leads to increased Inheritance Tax liability. However, they are often included in any event as a matter of best practice and to keep them informed of the situation.

In the example given above, if two blood children receiving 50% each under the will wanted to vary the will to include a third step child, then the two blood children would need to sign the Deed of Variation and ideally receive legal advice as to the effect on them and their legacy.

It will not necessarily be required for the ‘incoming’ step child to be a signatory, but again, many firms will include them in any event.

If there are pecuniary legacies in the original will (fixed sums left to named individuals or institutions), then these named individuals/institutions will not normally be required to sign the Deed of Variation, provided the changes which the Deed of Variation seeks to achieve does not affect their legacy.

Who pays for Deeds of Variation?

The expected position would be that the costs come from the Estate, prior to distribution.

If there is an unusual circumstance then this is something which may be considered and potentially adapted to suit the situation in hand.

If you believe that a Deed of Variation may be applicable to your situation, please do get in touch with our specialist Dispute Resolution Team for a free, no obligation discussion of your circumstances.

Alistair Rustemeyer

Partner, Solicitor

01273 329797

AlistairRustemeyer@rixandkay.co.uk

 

Rosie Duplessis

Chartered Legal Executive

01273 329797

RosieDuplessis@rixandkay.co.uk

 

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