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Consultation on Deeds of Variation

Yesterday saw the publication of the Finance (No 2) Bill 2015 and also the Government’s promised consultation on Deeds of Variation. Responses to the Consultation are invited via a survey and it appears that not a great deal of resource is being put into the exercise. The Government hopes to find out through the consultation how Deeds of Variation are being used, given that for some years HMRC have not had sight of the Deeds unless they resulted in an Inheritance tax (IHT) increase or decrease.

It might be assumed that if a number of Deeds of Variation are being drawn up which have a neutral effect on the IHT situation of an estate then they are not always being used for tax purposes, and this is indeed the case.

As we have said in previous blogs, Deeds of Variation, which allow the provisions of a Will to be altered within two years of a person’s death and for elections to be made for those changes to be treated as having been made by the deceased for tax purposes, are used for many reasons. These include remedying the effects of intestacy where a person dies without making a Will, and, as a result, his estate is distributed in an unwelcome way; putting in place more up-to-date provisions where someone has made a Will but failed to alter it as circumstances change, and settling disputes about the distribution of an estate.

As far as the latter use is concerned, bereavement is one of the most stressful events that can happen to anyone and that stress must only be compounded when there is a family argument about the deceased person’s Will. Removing the ability to implement an agreed resolution to such a dispute in a tax efficient manner will not help the situation. It would also seem unfair to deny a deceased’s family the opportunity to put in place the type of Will that the deceased might have done had he had access to good advice about how to structure the distribution of his estate.

The consultation remains open until 7 October 2015 and we would urge all those affected to respond to it. A link can be found here.

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