Varying the distribution of an estate after death
After a death, it is quite common for a beneficiary to redirect their inheritance to another person. This can be done by the beneficiary entering into a Deed of Variation, sometimes called a Deed of Family Arrangement, although the assets can be redirected to any individual, not just family members.
This can provide flexibility in a range of ways, and some examples of when this may be beneficial are:
- To make provisions for someone who was not included in the Will, for example a new grandchild that was not born at the
time the Will was made;
- If a beneficiary wishes to make a gift of their inheritance, or part of it, to someone else;
- To redirect assets into a trust, for asset protection purposes;
- If a beneficiary wishes to provide for others, for their own estate planning purposes;
- If the deceased made a gift to charity but this was not enough to secure the 36% lower rate of Inheritance Tax, the Will can be varied to increase this gift;
- If assets have passed automatically to a surviving joint owner, and this is not in their best interests;
- In order to settle potential claims by disgruntled family members, to avoid costly litigation;
- If a person dies without leaving a Will and the intestacy provisions are not in the family’s best interests.
There are, however, practical considerations and requirements to ensure the variation is effective.
- The variation must be made within two years of the date of death;
- The new beneficiary cannot make any form of payment for the variation, whether in cash or in any other form;
- In order for the variation to be retrospective for Inheritance Tax and Capital Gains Tax, (i.e the varied assets will be treated as a gift directly from the deceased to the new beneficiary) the variation must contain the appropriate statutory statements;
- An asset can only be varied once;
- If additional Inheritance Tax is payable as a result of the variation, then the Personal Representatives must also be a party to the variation;
- H M Revenue & Customs provide a helpful checklist to ensure a variation meets requirements, to view please click here.
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