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Understanding Wills and Deeds of Variation application

15 December 2020

The Brand Financial Training team examines Will writing and where Deeds of Variation can apply and be of benefit to clients.

Everyone should make a Will, yet the fact is that still only 1 out of 3 of us actually gets round to doing it, and a fair few of those are picking up a pack from a local stationery shop and doing it themselves, which is perhaps ok where the arrangements are fairly simple but for those who have children from previous marriages, or are unmarried with children then the best way is the professional way.

There’s a lot to decide when considering the practical matters of mortality. Firstly, who to choose as executors? Most will choose those people that are closest to them – a spouse or other close members of the family. The duties of an executor are:

  • Determining the assets and debts of the estate
  • Collecting the assets and paying the debts of the deceased
  • Paying any tax bills
  • Completing the accounts
  • Obtaining probate
  • Distributing the estate as per the Will

The executors have an important role to play and it can be quite onerous, particularly for a surviving spouse. It is therefore possible to choose a solicitor to carry out the role who will know exactly what to do, without emotion getting in the way, but who would also impose a hefty fee.

If there are young children, parents may wish to appoint guardians for them. In most cases there will be a surviving parent but sometimes there won’t be, so appointing guardians becomes crucial, maybe even a couple of choices just in case those that are the first choice have circumstances that mean it’s not possible to take the role on at the time.

Dying Intestate

If a Will is not left, we are said to have died ‘intestate’ and the laws of intestacy will apply. There are different rules for those that are married with children and for those that are married without. Unmarried couples have no rights over each other’s estates at all – although it has been considered whether this should change, nothing has as yet, so it is even more important that they have written Wills.

If a Will is written then generally speaking someone can decide who they leave their assets to. However if reasonable provision has not been left for certain dependants then a court can override under the Inheritance (Provision for Family and Dependants) Act 1975.

One of the most compelling reasons for employing a professional to write a Will is the stories around Wills failing through silly errors, for example, it not being witnessed or signed. Using a professional would avoid errors such as these and would make sure that if their client was 1 of the 3 that has decided to do the right thing then at least what they’ve done is legally valid.

Deeds of Variation

If a Will has been written (and even where one hasn’t), a deed of variation can be used in certain circumstances. These have been threatened in the past with governments stating they will be under review for IHT planning but nothing has changed as yet so we can carry on using them as a legitimate way to re-arrange someone’s affairs after death. There are various reasons why this might be appropriate:

  • To provide for someone who has not been included in a Will
  • To provide for someone who has not been sufficiently provided for
  • To save inheritance tax
  • To make changes to gifts that were made in a Will
  • To make changes to how property is owned – from joint tenants to tenants in common

A deed of variation allows the beneficiaries of someone’s estate to change the deceased’s Will up to two years after they’ve died (as long as they are over 18 and of sound mind).

They’ve been a long and well used method for many years now, often to allow families to skip a generation.

Example

Imagine that Brian has died and has left his estate to his son Matt. Matt is already concerned about his own inheritance tax problems so decides to amend his father’s Will using a deed of variation to re-direct the inheritance to his own children, Brian’s grandchildren.

Using a deed of variation ensures that Matt isn’t treated as having made a gift himself (and therefore avoids the usual need to survive seven years) and also avoids worsening his own inheritance tax situation.

A deed of variation is essentially post-death planning and should never be thought of as a substitute for pre-death planning. However they are useful, so as well as one needing to be done within two years of death the following conditions also need to be satisfied:

  • the deed must refer to the Will (or intestacy) that is being varied
  • there must be a statement that the variation is to have effect for inheritance tax as if the deceased had made it
  • it must be signed by those who would have benefited from the original Will provisions as well as those making the variation
  • where the result is that more inheritance tax needs to be paid, the deed must also be signed by the personal representatives
  • there must be no consideration in money or money’s worth

If the variation means more inheritance tax needs to be paid then a copy needs to be sent to HM Revenue & Customers within 6 months of making it.

 

 

 

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