Deeds of variation in review spotlight - Palmers Solicitors

Deeds of variation in review spotlight

The future of a valuable tool enabling beneficiaries to change a will after a death has been thrown into doubt.

In his 2015 Budget on 18 March, Chancellor George Osborne included an announcement that the government would carry out a review of the use of deeds of variation, which can be used to mitigate inheritance tax, the tax paid at 40 per cent on the value of estates worth more than £325,000.

A deed of variation enables a will to be amended in a tax-effective way within two years of the death of the person who made it, provided that any beneficiaries left worse off by the changes agree.

Where there is no will, an estate will be distributed according to the laws of intestacy. People automatically inheriting under the intestacy rules can also use a deed of variation to make changes to the way the estate is distributed

Lee McCLellan, a partner at Palmers with particular expertise in will<!–>s and inheritance tax planning, said: “Although deeds of variation are often thought of chiefly as a tool to reduce inheritance tax and capital gains tax bills, they are much more than a tax planning tool.

“Circumstances where a deed of variation can be particularly useful include where a will may have been drawn up incorrectly, or worded confusingly. In such cases, using a deed of variation could help to avoid a dispute over a will, the number of which has been increasing over recent years.

“If someone has been left out of a will and the beneficiaries would like them to have a share of the estate, a deed of variation can make this possible. This could also be helpful where there is no will, for example when someone has died leaving a cohabiting partner who would not inherit automatically under intestacy rules.

“The review is due to report in the autumn of this year so anyone who has received an inheritance within the last two years, and wishes to find out more about varying the terms of the will, should seek legal advice as soon as possible, in case deeds of variation are made less flexible or scrapped altogether. For more information, please contact our Wills, Trusts and Probate team.”