Varying Wills after Death
NewsThe new Government, in its Budget on 22nd June, is expected to bring in a number of tax measures to try to address the large deficit in public finances.
One long standing generous provision, that has survived budgets over many years, is the ability for beneficiaries of a Will to make a “Deed of Variation” to retrospectively vary the provisions of the Will. This means that they can each agree, after the person who made the Will has died, to re-write the provisions of the Will as they affect them. The taxman will then treat that re-written version as if it was the Will made by the deceased. This can give opportunity to save Inheritance Tax.
For example, if a father made a Will leaving everything equally between his three adult children, after his death they could agree that in fact two of those adult children would prefer to re-write the Will (or their share of the Will) to pass their share (or part of it) down to their own children, ie to the grandchildren of the deceased. This would also apply even if the father had not made a Will and the adult children were due to inherit under the laws of intestacy.
The advantage of this variation for tax reasons is that the gift is treated by the taxman for inheritance tax purposes as coming directly from the estate of the father who has died, rather than being treated as a lifetime gift by the adult children – if it was instead made as a lifetime gift by them, they would themselves have to survive the relevant gift by a further seven years for it to be outside their own estate for Inheritance Tax purposes. The advantage for well off families is therefore in avoiding the money being potentially subject to Inheritance Tax on the estates of his adult children.
There are some rules that must be followed and professional advice of a solicitor should be sought. Any Deed of Variation must be done on only one occasion within a strict two year time limit from the date of the relevant death, and it must be validly signed by all the beneficiaries whose shares are affected by the proposed changes.
This ability to make a Deed of Variation can be of benefit to relatively well off families allowing them to re-write Wills after the death in a more tax efficient way that suits their circumstances at that time. However, you should still try to make your Will tax efficient in the first place, as there is no guarantee that a Government whose finances are under pressure will always continue to allow such a generous concession.
For more information contact Craig Russell on 02890 323843; email: Craig.Russell@harrisonsni.com