Varying the contents of a Will

It has always been possible for a beneficiary under a Will to transfer his gift to someone else, but a feature of inheritance tax legislation is that, provided certain conditions are met, the redirection of the gift is not itself a transfer of value but takes effect for inheritance tax purposes as if the redirected gift had been contained in the original Will.

There is a similar position in the capital gains tax legislation that the redirection need not be a chargeable event giving rise to capital gains tax.

A deed of variation (sometimes known as a deed of family arrangement) may enable advantage to be taken of factors unknown at the time of the Will. Changes in the financial circumstances of either the person who made the Will or a beneficiary or changes in tax legislation can mean that the most carefully thought out Will is not appropriate when the person making the Will dies as it is only then that the actual situation is known.

A deed of variation can be a very useful method of post-death tax planning, for example:

the original beneficiary may not need the gift and may wish to pass it on, perhaps to the next generation, without involving any possible inheritance tax problems for himself

the inheritance tax exemption of the deceased may be able to be more fully utilised thus potentially saving inheritance tax in the future

it may be possible to redirect the deceased’s share of a house, to prevent or reduce possible inheritance tax or nursing home fees

The main requirements of a deed of variation are:

it must be completed within 2 years of the death

any beneficiary who wishes to enter into the variation must be over 18; if under 18,the Court’s consent is required

although more than one deed can be completed within the 2 year period the same asset cannot be redirected twice

it is normally necessary to include elections in the deed for both inheritance and capital gains tax so that the tax benefits of the deed are obtained

heritance Tax matters, please do not hesitate to contact us on 020 8514 9000 or allinfo@edwardsduthieshamash.co.uk