Often, the tax consequences of wills aren’t considered when they’re written and can leave an unnecessary tax bill. Read our blog to find out what a post-death variation is, when you can use it, and what generally the benefits could be.
Note: this article is intended for general guidance only and does not constitute accountancy, tax or other professional advice. We recommend you seek specific advice based on your circumstances.
With the backdrop of COVID-19 being the new norm, death is not something many wish to talk about although it surrounds us now. And as many come to terms with personal loss, they are forced to deal with issues, perhaps prematurely, surrounding the financial aspects of losing a loved one.
One area where we have been inundated is in relation to wills and whether these can be changed post death.
The short answer is, as long as certain conditions are met, it is possible to change a will after death. This is known as a post-death variation, and it can be a useful tax planning tool.
A post-death variation can be made to:
- reduce the amount of tax payable
- to change who benefits under the will
- place the assets of the deceased into trust
- to provide for someone who was left out of the will
Conditions that must be met
In order to vary a will after the deceased has died, the following conditions must be met:
- it must be made within two years of the deceased’s death
- all beneficiaries adversely affected by the variation must agree to it and be party to it
- it must be made in writing
- it must contain a statement of intent for tax purposes, specifying that the beneficiary/beneficiaries elect for the relevant statutory provisions to apply
- if the amount of tax payable as a result of the variation increases, the personal representative must be party to it and agree to it
- it must not be made in consideration for money or money’s worth
Although there is no requirement for new beneficiaries to sign the deed of variation, this is often done as good practice.
Where a deed of variation is made, the will is treated as if applied, as so varied, at the date of the deceased’s death.
There is a two-year window in which a deed of variation must be made. It is possible that in the period between the date of death and the making of the deed of variation, changes have occurred. For example, the asset that is subject to the variation may have been sold. In this situation, the proceeds, rather than the actual asset, would be redirected as a result of the deed of variation.
Once made cannot be undone
Once a deed of variation has been made, it cannot be undone. It is therefore advisable to take advice prior to varying a will.
Bill dies in October 2019 leaving an estate of £1.5 million split equally between his wife, Barbara, and his sons Simon and Philip.
The family agree to vary the will so as to leave everything to Barbara to benefit from the inter-spouse exemption. Bill’s unused nil rate band will be available on Barbara’s death. Her will provides for everything to be left equally between her sons.
Simon and Philip must be agree to be party to the deed of variation as they are adversely affected by the redirection.
The deed of variation is made in February 2020. The changes are deemed to be effective from the date of Bill’s death as if they represented his will at that time.
If you need help with the tax implications of the above please call us on 0114 272 4984 or email at firstname.lastname@example.org.