Can my will be changed after my death?
Beneﬁciaries under a will may exercise a right to sign a Deed of Variation within two years of the Testator’s death to alter the terms of a Will. There may also be instances where the court could make a judgement.
Are Deeds of Variation common and why would they be used?
They are not prolifically common place and their use is primarily for the management of inheritance tax liabilities.
When would deeds of variation be used?
Nil-rate band (NRB) planning
One of the main reasons for using a deed of variation prior to the Finance Act 2008 was to ensure that the NRB was used between spouses/civil partners*.
Mr Smith dies and leaves his whole estate, an amount of £850,000, to his spouse.
Although there is no IHT due on Mr Smith’s death, Mrs Smith’s estate is now worth over £1,500,000 and on her death 40% IHT will be due on amounts over the NRB.
Historically, a deed of variation could have been executed which, for example, could have left a sum to the value of Mr Smith’s NRB to a discretionary trust for the children and the rest of the estate to his spouse, making use of his available NRB – this would still mean no IHT was due on Mr Smith’s death but less tax should now be payable on Mrs Smith’s death.
Mrs Smith could still have benefited from the trust but the trust assets would not form part of her estate for IHT purposes.
However, the Finance Act 2008 included legislation to allow the transfer of a
deceased spouse’s or civil partner’s* unused NRB to the surviving spouse or civil partner, up to 100% of the current NRB at the time the survivor dies.
* As defined by the Civil Partnership Act 2004.