Varying a will after someone has died
The COVID-19 pandemic is causing many of us to consider what steps we need to take to put our personal affairs in order. However, it is also posing so many challenges for us all in daily life that detailed tax planning, or updating your will to reflect a change of wishes, of family dynamics or of property values may never get to the top of the list for some. Whilst we would always recommend careful thought and planning as a best first option, where this has not been possible or time has run out and there are unintended consequences of a will or an intestacy arising on death, deeds of variation are a useful tool for the relatives or heirs to overcome these consequences.
There are numerous scenarios where a deed of variation might assist, for example:
- where someone has died without leaving a will;
- where someone has died leaving a will but it is out of date and does not reflect material changes in family circumstances or asset values;
- where a family member or third party initiates a claim against the estate of someone who has died and there is a wish to compromise that claim as swiftly as possible. Often deeds of variation can be agreed before any court proceedings are issued.
- to achieve tax savings for the beneficiaries of an estate where tax planning was not attended to in the lifetime; or
- to establish one or more trusts of assets to distribute the estate more widely or more fairly amongst beneficiaries and to add new beneficiaries.
There are certain requirements that must be met in order for the deed of variation to be effective. Briefly, these include:
- it must be signed and witnessed in accordance with the formalities of a deed. With current social distancing restrictions, achieving this needs more thought, but we can advise as to how to ensure the formalities are observed;
- all those whose interests are adversely affected by the terms of the variation must be parties to the deed of variation. Those whose interests are not affected adversely do not need to be a party or sign;
- variations may be agreed and concluded between beneficiaries without involving the executors unless the variation results in more tax becoming payable;
- children under the age of 18 can benefit from a deed of variation – a common use is to enable assets to pass down a generation for tax planning purposes. The position of a child cannot be prejudiced by changes made by a deed of variation however. This can be a stumbling block to using the deed of variation route, and it is one of a number of reasons why a deed of variation should be seen as ‘first aid’ after the event rather than relying in advance on using a deed of variation to be able to solve problems caused by the lack of a good will and estate planning; and
- the deed of variation must be executed within two years of the death and it is not possible to extend this time limit. Whilst this sounds like a fairly long time, it is best to seek advice at any early stage if you think a deed of variation would assist your circumstances as there can be a number of considerations that need to be discussed with multiple family members that need to take place before the terms can be concluded.
Bear in mind that it is not possible to vary an asset twice for tax effectiveness and so it is important to get any variation right first time.
If you think that a deed of variation may assist you or your family’s circumstances, we would be pleased to discuss this with you. Do get in touch with your usual BDB Pitmans contact or Lucinda Brown.