Is this the end of the deed of variation?

Following the July 2015 budget, the Government has followed through on its promise and launched a consultation on the use of deeds of variation.

The current rules on deeds of variation allow a beneficiary to redirect their inheritance to other people and charities.  This allows for inheritance tax and capital gains tax to be treated as if they had been part of the deceased’s Will, rather than a redirection between beneficiaries.  Currently, you have two years from the date of death to execute a deed of variation.

Historically, HMRC is only notified about deeds of variation if it effects Inheritance Tax.  As a direct result, the 12 week consultation period has been launched to explore the circumstances in which deeds of variation are used for tax purposes and how often.

So what does this mean for me?  Well, any change or limit on the use of deeds of variation could affect the different generations in your family and the benefits they receive from a deceased’s estate.  Where parents, grandparents, siblings or children have made Wills in the past and not reviewed them regularly, there could potentially be an inheritance tax liability or more simply the loss of benefit for a whole generation.

So, how can this be avoided?  The simplest way is to act now and take control of your own affairs by reviewing your Will.

It is advisable to review your Will regularly, and in particular to check these points:

You will need to check that your Will appoints the correct executors to administer your estate.  Ensure that their details such as names and addresses are correct.

Review your legacies and check they are still relevant.  Update any legatees who have died in your lifetime and consider if you want to remove the legacy or benefit their next generation.

It is vital to check that your estate is being left to the correct members and generation of your family. If your chosen beneficiaries are not in need of your inheritance, consider benefiting the next generation allowing you to pass on as much of your estate as possible while you still can.

If you have had any experience with deeds of variation or are considering using one, HMRC is inviting individuals to comment on the consultation.