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.

Our experienced team of Wills, Trusts and Probate lawyers can help or guide you as to when a variation is required, please call us on 01202 525333 or email us here.