Estate Planning Strategies - Deeds of Variation

Estate planning is a critical aspect of securing your family’s financial future and ensuring that your wishes are met. One tool that can be utilised to tailor your estate plan, under certain circumstances, is a deed of variation.

Deeds of Variation, or alternatively known as ‘Deeds of family arrangement,’ are legal instruments that allow a beneficiary to make changes to a deceased person’s Will after they have passed away. These changes can include altering beneficiaries, redistributing assets, or specifying new conditions.

There are several benefits that stem from the making of a Deed of Variation. The first is the unapparelled flexibility that comes from this deed. There are no certainties in life and because of this the needs, and in particular financial needs, of families change. A deed of variation provides the ability to move money and assets to where they are most needed.

One of the largest benefits of a deed of variation is the potential tax break that it can provide. Through the redistribution of assets within your estate, you could potentially be reducing the taxable portion of an estate which could reduce your future Inheritance Tax liability and save substantially for your beneficiaries. This is due to the fact that if a Deed of Variation is made correctly, then the assets bypass the original beneficiary as though the gift was made by the deceased and therefore those assets are removed from the original beneficiary’s estate straight away without the need to survive for 7 years.

Another benefit that emerges from a Deed of Variation is equity. A Deed of Variation can address any issues of fairness between beneficiaries of a Will. If you desire your assets to be distributed more equitably, then a Deed of Variation provides a mechanism for making those changes.

A Deed of Variation can also be used to redirect some (or all) of a beneficiary’s share in an estate to charity, which could in turn reduce the Inheritance Tax liability for the estate.

The next step is to understand the process of creating a Deed of Variation.

There must be absolute agreement between all the beneficiaries who will be affected by the changes made by a Deed of Variation. There are several legal requirements to adhere to as well. It must be in writing and signed by all parties involved. To be effective in potentially reducing Inheritance Tax then a Deed of Variation must be made within 2 years of the date of death.

Deeds of Variation should be considered a valuable tool within estate planning. They allow you to vary an estate depending on the differing circumstances that you find yourself in, potentially make large saving on taxes and can provide a technique that ensures a fair distribution of the assets amongst the beneficiaries.

Get in Touch:

If you would like to explore the possibility of a Deed of variation further, we are here to help. Our Wills, Trusts, and Probates department can provide expert guidance and explain the benefits in further detail.

The contents of this post do not constitute legal advice and are provided for general information purposes only.