Private Wealth Blog - Variations on a Deed
It is estimated that around 60 per cent of adults in the UK have not made a Will, including a third of those aged over 55. Clearly if they die unexpectedly their Estate may not devolve as they wish.
There are others who have made a Will and yet who never quite get round to updating it, so that when they die it fails to reflect their true wishes.
Take the situation of young parents who make Wills leaving everything to each other and on second death to their two young children. And who fail to amend the Wills when their third child is born, or an elderly testator who leaves legacies to grandchildren but neglects to include a provision for others born after the Will is made. Of course a good solicitor will be able to draft a Will to ensure that such eventualities are covered but, if they have not been, it is quite possible to see how a Will can fail to take into account the true wishes of a testator.
It is for this reason that a deed of variation can be such a useful tool. Provided that it is executed within two years of the testator's death and as long as all the beneficiaries are of age and agree, the Will can be varied.
A testator should not rely on his or her beneficiaries agreeing to execute such a deed and anyone whose Will does not reflect their true wishes should ensure they update it. There will be cases where the beneficiaries will not agree to change a Will and other cases where there are minor beneficiaries who cannot consent and where the permission of the Court will be required to vary the Will, which can be costly and time consuming.
In the run up to May's general election deeds of variation were thrown into the spotlight when it was hinted that Ed Miliband, his brother and mother had varied his father's Will to make it more tax efficient. The resulting newspaper headlines suggested that deeds of variation were exploiting loopholes in tax legislation and in July's Budget it was no surprise when the Government announced a review of deeds of variation.
HMRC has revealed that it has very little information on the use of deeds of variation. This is because it is only if a deed of variation results in an adjusted amount of inheritance tax that executors need inform HMRC that they are making one. There is some concern that the intention is to clamp down on the use of deeds of variation where they are used to reduce inheritance tax.
HMRC’s consultancy process will last until 7 October and a survey can be completed online by interested parties. Once the results have been analysed, HMRC will decide whether any changes are to be made.
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