The government has announced that it will not abolish or restrict the use of deeds of variation, which will continue to be a legitimate way to vary estates after death in a tax efficient manner.

At the time of the Budget in March 2015, the government announced that it would carry out a review looking into the use of deeds of variation to save inheritance tax, as part of its general clampdown on tax avoidance.  This caused some concern that the government was about to abolish or restrict the use of deeds of variation.

A deed of variation is a legal document whereby a beneficiary of a deceased person’s estate can give away all or part of their inheritance to some other person (or charity), who would either receive less from the estate under the Will, or perhaps who were not a beneficiary under the Will at all.  They can be very useful in certain circumstances, e.g. where a person dies leaving an out-of-date Will (or no Will), because such deeds can be made to correct perceived inequalities in the distribution of the deceased person’s estate.  Provided deeds of variation are made within two years of the date of death, their terms can be read back so that the changes have no capital gains tax or inheritance tax implications.  If deeds of variation were abolished, this could cause adverse tax consequences for some bereaved families and/or litigation to resolve problems which can arise on death.

Thankfully, after completing its review, the government announced that it will not introduce any new restrictions on deeds of variation, although it will continue to monitor their use.

If you would like further information about deeds of variation, please contact the partner at Hunters with responsibility for your legal matters, or any other partner in the Private Client Department.