Post death variations

When a person passes away their estate is distributed either under the terms of their Will, if they made one, or under the Intestacy rules if they pass away with no valid Will in place. However, beneficiaries of an estate can make post death variations to redirect who is to receive all or part of their share of the estate regardless of what is included in the Will or the Intestacy rules dictate.

Post death variations are usually carried out via a document called a Deed of Variation that allows a beneficiary or beneficiaries of an estate to vary their entitlement and redirect the assets.

There are several advantages to post death variations and they can be used for the following:-

to make provisions for other beneficiaries in greater need of funds
ensure an estate is distributed more equally to avoid conflict
provide for those not included under the Will or the Intestacy rules
take advantage of potential tax savings for the estate and individual beneficiaries
provide future tax planning for the next generation

If an individual was to inherit under a Will but was financially secure and did not need the money they may enter into a Deed of Variation so that their children inherited the money under the Will instead. A Deed of Variation can allow inheritance to effectively bypass the original beneficiary in favour of the next generation. This way the parent, as the original beneficiary, avoids the potential unfavourable tax consequences of inheriting under the Will and then gifting this inheritance to their children.

Family circumstances can change over the years and if Wills are not updated certain family members may inadvertently be missed out and not provided for. A Deed of Variation can therefore rectify any such inequality and potentially prevent unpleasant family feuds at what is already a very difficult time. In situations where there is no Will a person's estate is distributed in accordance with the intestacy rules, which are very prescriptive and, for example, would not allow for an unmarried partner of the deceased to inherit any of their estate. Again, a deed of variation could be entered into by the beneficiaries to ensure that the deceased's partner inherited some benefit.

Post death variations are also useful if the Will of the deceased has not been drafted in the most tax efficient way or if subsequent changes in the law mean there are potential tax savings which have not been taken advantage of. Certain assets qualify for relief from Inheritance tax and certain persons are exempt for Inheritance tax purposes. Therefore, post death variations can redirect certain assets in order to ensure the maximum tax savings are secured for the estate.

There are a number of requirements which must be met in order for a Deed of Variation to be effective. Arguably the most important point to remember is that it must be executed within two years of the death and any beneficiary whose entitlement is being altered would need to agree to the changes. Our private client team are happy to provide you with more information about post death variations if you think any of the above may be relevant to you or an estate you are administering.