DEEDS OF VARIATION


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DEEDS OF VARIATION


 

Welcome to our Law for Life web pages on Estate Administration and how to obtain a Deed of Variation.

A Deed of Variation is referred to as also a “Family Arrangement” or a “Instrument of Variation” or a “Deed of Surrender” or “Deed of Assignment”

There are various reasons why beneficiaries might want to alter and change the distribution of a deceased’s estate. These can include making changes to save on paying Inheritance Tax, or providing protection against assets and property being used to pay for residential care fees or simply reorganizing a persons.

HOW CAN WE HELP? YOUR QUESTIONS ANSWERED


WHY MAKE A DEED OF VARIATION? There are various reasons why beneficiaries might want to alter and change the distribution of a deceased’s estate. These can include making changes to save on paying Inheritance Tax, or providing protection against assets and property being used to pay for residential care fees or simply reorganizing a persons.

INHERITANCE TAX PLANNING A Deed of Variation is can be used  to reduce the potential inheritance tax liability of a deceased’s persons estate. For example the deceased’s estate could be varied so that a proportion of the estate is gifted to organisations without Inheritance Tax is payable such as Gifts to Charities, Donations to Political Parties, Gifts to National Museums, Universities and National Trust or Donations of National Heritage property to certain non-profit making bodies. By doing this the value of the deceased’s estate for Inheritance Tax purposes can be reduced.

If the deceased’s estate proposes to distribute assets to a person who already has sufficient assets of their own and may have an inheritance tax problem themselves then that person could elect to have the assets passed to their children instead, thereby reducing the potential value of their estate. In this way the person who has given up their entitlement to the deceased’s estate  is not deemed to have received or made the gift but instead it is the deceased who is deemed to have made the gift direct to the grandchildren. That way the person can reduce any potential Inheritance Tax liability upon their death.

RESIDENTIAL CARE  One way in which married couples can protect and ring fence half of their shared assets from being used to pay for residential care fees is after the first death for the survivor to enter into a Deed of Variation so that the deceased’s half share passes not to the survivor but into a trust or to their children.

Many married couples either do not have a will or leave everything to each other. This is a perfectly reasonable thing to do but sadly it offers very little protection from the assets being claimed to pay for future residential care fees.

By changing a deceased persons will after a their death to try and avoid care cost assessment can sometimes be seen by local authorities as an attempt to deliberately deprive themselves of assets they could have used to fund their long term care costs.

However entering into Deeds of Variation to provide protection of half of a married couples assets is still a worthwhile strategy that still often successful particularly if the survivor is not at risk of entering into residential care in the short term.

REORGANISING AND REBALANCING ESTATES Sometimes following a death it becomes clear that the terms of the deceased’s will might lead to some problems such as certain people benefiting more than they should. By using a Deed of Variation the deceased personal representative or executor can change the way monies are allocated to redistribute and reallocate moneys in a way that the family are more comfortable and happy with.

EXAMPLES OF ABOVE


To Redistribute and Balance out Estates - For example, e.g. the children of the deceased  might have been left different percentages of the deceased’s estate. However they now agree that they would prefer if they all inherited the same amount.

To Redistribute and Balance Out Wealth - For example, a wealthy sister and a poorer sister might have been left the same percentage share of the deceased’s estate but they now might agree to alter the percentages so that the poorer sister receives a larger share.

CONSENT OF BENEFICIARIES Deeds of Variation need to have the agreement and consent of all the beneficiaries affected by the proposed changes. If children, minors or persons with a mental disability are involved and they cannot themselves consent to the changes then an application needs to be made to the courts for consent to be obtained on their behalf.

TWO YEAR DEADLINE Deeds of Variation need to be made within two years of the death of a deceased for the new arrangements to be effective for inheritance tax purposes.

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