A deed of variation is a legal document which can be utilised where a person has received an asset via a Will (including a trust within the Will) or the intestacy rules, but the person would like to vary how they benefit or redirect who benefits from the asset. Providing the formalities of the deed are fulfilled then any entitlements given up will, in effect, be treated as having taken place on the donor’s death, ie effectively rewriting the Will.
There are a number of reasons why a deed of variation may be used to redirect assets as described above, but primarily it is for tax planning opportunities
Mr Jones dies and leaves a valuable painting, worth £50,000, to his son John Jones. John Jones is wealthy in his own right and has his own inheritance tax (IHT) issues. Therefore, John Jones executes a deed of variation redirecting the ownership of the painting to his adult daughter, Jane Jones. Assuming all formalities are adhered to, then for IHT purposes, it is as if the gift had been left directly to Jane.
Since 1 August 2002 it is only necessary to inform HMRC of a deed of variation if the tax position is changed by the variation.A copy of the deed of variation along with a completed checklist, known as ‘IOV2 Instrument of variation’ should be sent to HMRC
We can advice and prepare your Deed of Variation for you. Pleaase contact us for more information.