Deeds of Variation Package
What is it?
The Deeds of Variation Package consists of a deed varying the provisions of a Will (or intestacy if there was no Will) within two years of the testator’s death, together with any related documents such as letters of wishes.
Deeds of variation are often drawn up for tax saving or asset protection purposes and are a tax efficient way of redirecting a beneficiary’s entitlement in relation to an estate when it is appropriate to do so.
Who is it for?
A deed of variation is suitable for anyone wishing to re-direct their entitlement under a Will or intestacy, without incurring a tax liability, if the testator died within the last two years. A deed of variation can be a very useful tool for tax planning, succession planning and can assist in the protection of assets against third party claims.
How does it work?
Normally when a person makes a gift this involves a potential or immediate charge to inheritance tax (IHT) and, for a noncash gift, a possible capital gains tax bill also. If, however, an entitlement under a Will or intestacy is redirected by a deed of variation then there will be no tax liability for the original beneficiary if the deed is in the correct form, is entered into within two years of the death and includes appropriate elections for tax purposes.
Deeds of variation are drawn up for multiple purposes but tax saving can be a major advantage of such deeds through, for example, generation skipping, maximising IHT reliefs and ensuring that an estate qualifies for
the new 36% reduced rate of IHT if at least 10% of the net estate is given to charity.
Assets can also be placed into discretionary trusts via a deed of variation ensuring that the assets in the trust are given a measure of protection against third party claims and are held outside of the original beneficiary’s estate for IHT purposes.
What are the tax savings?
The tax savings can be significant. For example, consider the common scenario of generation skipping:
Sarah is a beneficiary of her widowed mother’s Will and expects to receive about £200,000. Sarah’s own assets mean that she already has a potential IHT liability and she does not anticipate requiring her inheritance from her mother.
Within two years of her mother’s death, Sarah could enter into a deed of variation in favour of her two children. The gift is regarded as being made by Sarah’s mother for IHT purposes so there is no IHT liability or survivorship period for Sarah in making the gift. The £200,000 does not form part of Sarah’s estate and saves, on current rates, £80,000 of IHT on her death.
In this situation, if Sarah felt that she might need to benefit from the inheritance in the future, instead of making an outright gift to her children by deed of variation she could consider redirecting her entitlement to a discretionary trust of which the beneficiaries could be Sarah and her children. This way the assets are still outside of Sarah’s estate for IHT purposes but she could benefit from the assets in the trust if necessary at the trustees’ discretion.
What will we provide you with?
This Package consists of:
- a deed of variation incorporating all necessary tax elections; and
- any required associated documents, such as a letter expressing your wishes with regard to the administration of any trusts created by the deed of variation.
The cost
If we receive your instructions to effect the variation at least 2 months before the 2 year variation period expires, our fees are:
- Deed of Variation adding legacies only (no trusts) – £1200 plus VAT
- Deed of Variation adding trusts or making gifts to existing trusts including tax and estate planning advice and documentation – £2000 plus VAT
- Due diligence report – £1200 plus VAT
- Deed of Variation for one loan plan legacy – £1000 plus VAT
- Plus fee of £200 plus VAT for each additional loan plan legacy
- From £600 for registration with the Trust Registration Service.