Changing The Distribution Of An Estate

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Changing the Distribution of an Estate

There are various reasons why beneficiaries might want to alter and change the distribution of a deceased’s estate. These include:-

  • Inheritance Tax
  • Residential Care
  • Rebalancing the Estate

In order to achieve these aims however, a Deed of Variation must first be created to allow a beneficiary to re-direct their benefit to someone else.

What is a Deed of Variation?

A Deed of Variation allows a beneficiary under a Will or intestacy to redistribute their benefit to someone else. Aside from Inheritance Tax purposes, it can be done at any time, before or after a Grant of Probate is issued, and can even be carried out after the administration of the estate has been completed.

A variation, however, cannot be done without the consent of everyone likely to be affected by it. Deeds of Variation need to have the agreement and consent of all the beneficiaries affected by the proposed changes. If children, minors or persons with a mental disability are involved, then an application needs to be made to the courts for consent to be obtained on their behalf.

For more information on how to obtain a Deed of Variation, contact us now on 01536 276300 to arrange a free no obligation chat.

Inheritance Tax

A Deed of Variation can be used to reduce the potential Inheritance Tax liability of a deceased person’s estate (for example, if the re-directed gift is to a surviving spouse or charity).

If the deceased’s estate proposes to distribute assets to a person who already has sufficient assets of their own and may have an inheritance tax problem themselves, by creating a Deed of Variation, that person could elect to have the assets passed to their children instead, thereby reducing the potential value of their estate.

In this way, the person who has given up their entitlement to the deceased’s estate is not deemed to have received or made the gift but instead it is the deceased who is deemed to have made the gift direct to the grandchildren.

For a Deed of Variation to reduce the amount of Inheritance Tax payable, the following requirements must be satisfied:

  1. The Deed of Variation must be completed within two years of the date of death.
  2. The relevant tax declarations must be included in the Deed.
  3. No incentives should be given to any beneficiary to enter into the Deed.
  4. The destination of a benefit cannot be varied more than once in different deed, although more than one deed is permissible if they deal with different benefits.
Residential Care

One way in which married couples can protect and ring fence half of their shared assets from being used to pay for residential care fees is if, after the first death, the survivor enters into a Deed of Variation so that the deceased’s half share passes, not to the survivor, but into a trust or to their children.

By creating a Deed of Variation, changing a deceased person’s will after their death to try and avoid care cost assessment can sometimes be seen by Local Authorities as an attempt to deliberately deprive themselves of assets they could have used to fund their long term care costs. However entering into a Deed of Variation to provide protection of half of a married couples assets is a worthwhile strategy that is still often successful; particularly if the survivor is not at risk of entering into residential care in the short term.

Re-Organising and Balancing Estates

Sometimes, following a death, it becomes clear that the terms of the deceased’s Will might lead to some problems such as certain people benefiting more than they should. By using a Deed a Variation, the deceased’s Personal Representative or Executor can change the way monies are allocated to redistribute and reallocate in a way that the family are more comfortable and happy with.

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