The short answer is yes. Ovid Busette explains how and in what circumstances a Will can be legally changed.
What can you do if someone has not written their Will in the most tax-efficient way or if they have perhaps inadvertently left someone out of their Will? A deed of variation (DoV) is a legal document that allows the beneficiaries of an estate to make changes to a Will, in the name of the deceased, after their death.
Deeds of Variation
It is possible to alter the provisions of a Will of a deceased individual to change the way in which their estate is distributed. Similarly, if someone dies intestate, that is, without making a Will, it is possible to change the way in which their estate will be distributed. This can be done by preparing a Deed of Variation. The court generally has regard to the testamentary freedoms of individuals – that is the right of the person writing their Will (the testator) to dispose of their estate as they see fit. However, the court also recognises that there are instances where individuals may not wish to benefit from a deceased’s estate and cannot force them to do so.
For some beneficiaries, receiving an inheritance from the testator’s estate may enrich their own estate to the extent that it becomes liable to Inheritance Tax (IHT). The beneficiary may also wish their children to benefit from the inheritance to help establish them in life. If the beneficiary made a gift to their children themselves on receiving monies from the estate and then died within seven years of making that gift, the gift may become liable to IHT.
By entering into a Deed of Variation, the beneficiary can vary the terms of the testator’s Will so that their share of the estate passes to their children instead of the beneficiary. The Will is read as if the gift was passed to beneficiary’s children by the testator instead of the beneficiary. This has the desired effect of reducing the beneficiary’s potential IHT liability and makes provision for their children without the beneficiary or their children having to worry about any potential tax liability if they fail to survive for seven years after making the gift.
The transferrable ‘nil rate band’
Prior to 2007 the inheritance tax allowance or ‘nil rate band’, as it is commonly referred to, was not capable of being transferred between spouses. Therefore, to prevent the ‘nil rate band’ from being wasted, it was common to include a ‘nil rate band’ discretionary trust which on death would utilise the deceased spouse’s ‘nil rate band’ for the benefit of his/her spouse and or children.
Post 2007 this is no longer necessary, as the Finance Act 2008 made it possible for married couples and civil partners to transfer their ‘nil rate bands’ to the estate of the surviving spouse or civil partner on their death. On making a gift of their estate to their spouse on death, the testator would create a tax saving by making use of the spouse exemption, which excludes any gifts made to spouses during life or death from tax, and also allowed for the transfer of the ‘nil rate band’.
However, in cases where the testator had prepared a Will with a ‘nil rate band’ discretionary trust this prevented the ‘nil rate band’ from being transferred to the surviving spouse’s estate.
In instances such as these, the Deed of Variation is a valuable instrument which allows beneficiaries and executors to vary the terms of the Will to remove the ‘nil rate band’ discretionary trust and gift the testator’s entire estate to the spouse.
Deed of Variation: a negotiation tool
Above, we briefly discussed the court’s general regard to testamentary freedom. However, increasingly we have seen the testamentary freedom of testators being tested and aggrieved would-be beneficiaries have found ways of successfully challenging the testator’s decision to exclude them from a Will or increasing their entitlement to the estate. Even where the potential claimant is not successful, the costs of challenging the testator’s Will can be extensive to the estate and also cause great damage to familial relationships with relations refusing to speak to each other following a dispute.
The Deed of Variation can be used as a tool to negotiate a settlement with an individual who believes that they should have received a share of the testator’s estate. Once all parties agree, the testator’s Will can be varied to benefit the previously excluded beneficiary saving the estate from being depleted from the costs involved in litigation and potentially also paving the way for more cordial relations between family members.
Requirements for a valid Deed of Variation
To be effective the Deed of Variation must satisfy the following legal requirements:
- Executed, i.e. signed, within two years of the testator’s death
- Signed by the beneficiaries who are affected by the changes to the provisions of the Will. Where the changes to the Will affect the tax position of the estate it must also be signed by the executors. It is advisable to get the executor’s agreement to the terms of the Deed of Variation to avoid the potential of a later dispute. Please note that where there are minor beneficiaries (i.e. children under the age of 18 years) it is not possible to vary the terms of the Will which affect those beneficiaries.
- The signatures must be witnessed although the witness does not need to be a solicitor or lawyer
- It must contain statements confirming that the signatories intend for tax consequences to apply.
Before considering entering into a Deed of Variation all parties should seek advice on the legal and tax consequences of doing so.
For further information on a Deed of Variation or making a Will, contact one of our Private Client experts who will be happy to help.