Bluebond Estate Planning
Bluebond Inheritance Tax Planning
Bluebond Property Tax Planning

Deed of variation

Deed of variation

Deed of variation

If your estate is worth more than £325,000 then your beneficiaries will be faced with an inheritance tax bill of up to 40% of any amount over that sum on your death. For married couples, you can add together your £325,000 threshold and have a £650,000 threshold for IHT reasons, reducing IHT for your beneficiaries.

There is a loophole which is being used more and more called a deed of variation to reduce IHT bills. It involves a law which involves changing wills to redirect a deceased person’s estate and assets. A deed of variation can be used where a descendant can give some of what they received from the will to someone else – often a discretionary trust or a charity. For the deed of variation to work, they just need everyone who was included within the will to agree with the changes within 2 years of the death of the person whose will is being varied.

A deed of variation is generally used by those who may not need all of the inheritance that they received from the will, so they redirect their inheritance to their children to use later on in life.  Either this or if a will wasn’t kept up to date and there were children or grandchildren who were not included within the will.  You can use a deed of variation to change the distribution of the deceased assets to make most of the IHT rules which exempt particular assets and beneficiaries.

When a person’s assets are passed onto their spouse/civil partner, their assets are exempt from any IHT.

So if someone is receiving assets which would be exempt from IHT, you can re arrange things so that these exempt assets can be passed to someone who would otherwise be liable for IHT. An example of this is that if the estate includes a business, it could get 50% or 100% IHT relief, so a deed of variation could be used to pass that onto children rather than a spouse/civil partner.

You need to remember that the deed of variation must be in writing, created within 2 years of the deceased death and signed by all beneficiaries of the estate. To do this properly and easily, contact us and we will be happy to help and save you money from IHT.

Leave a Reply

Your email address will not be published. Required fields are marked *

Get Connected!
Facebook     Twitter