DIY 'Deed of Variance'

willam

I am the sole executor of my wife's will. She left sums to each of our 3 children and the residue to me. Our house has shot up in value recently. I am 80 this summer and don't need her money, and I know she would be happy for it all to be given to our children, rather than let her savings pay Inheritance Tax when I go.

"Easy to fix" I'm told at my bank. " Appoint a solicitor to draw up a Deed of Variance to transfer of some or all of your share to the children." ...Also said the time limit was two years after the death.

Why must I have a solicitor? The bank suggests it's mandatory. But if I write a statement of my wish, date it, and have it witnessed by my children, would this not be good enough for the Tax Revenue people at my demise? A deed of covenant for charity is acceptable without a lawyer, so why not this? The experienced bank spokesman says the cost is not much over £200 inc vat... maybe it's reasonable but have I any choice?

cheerfulcat

Hello, willam

I assume what was meant was a deed of variation.It would be mad to attempt to DIY. £200 is not a lot of money to pay in order to shelter your estate from IHT ( and perhaps your children could cover the cost? ).

Why must I have a solicitor? The bank suggests it's mandatory. But if I write a statement of my wish, date it, and have it witnessed by my children, would this not be good enough for the Tax Revenue people at my demise? A deed of covenant for charity is acceptable without a lawyer, so why not this?

Because it is not your wish that counts as such; though all beneficiaries of the will must agree to it, what actually happens is that your wife's will is changed retrospectively. As far as I know the two year limit still applies.

I strongly recommend that you see a solicitor.

Regards

Cheerfulcat

willam

' Deed of Variation'.... yes, thanks. Your reply is sensible and no doubt comes from experience. It is in line with the bank, and indeed what I would expect should I ask a solicitor. But I still hope for technical answers....

(i) Is there any statutory reason I need a lawyer to administer my Deed of Variation?

(ii) The only interested parties are myself, my offspring, and the Inland Revenue. It is an everybody wins situation except for the IR. So if my approach to the IR is accepted (that they recognise my DIY Deed) what possibly in my case can go wrong?
In other words, though £200 is not too much for peace of mind, exactly what risks am I paying to shelter?

Thanks again. Regards, willam.

cheerfulcat

(i) Is there any statutory reason I need a lawyer to administer my Deed of Variation?

Not so far as I am aware. However, it is a legal document and like all such has to be worded in a particular way. I suspect that any non-standard documents could cause difficulties later.

(ii) The only interested parties are myself, my offspring, and the Inland Revenue. It is an everybody wins situation except for the IR. So if my approach to the IR is accepted (that they recognise my DIY Deed) what possibly in my case can go wrong?

Famous last words if I ever heard them! To be honest, I don't know; I am not a lawyer. But there are more considerations here than just IHT, for example the "deprivation of assets" question should you have to go into care at some point. And I suspect that the Revenue will take a fairly dim view of your DIY job...

In other words, though £200 is not too much for peace of mind, exactly what risks am I paying to shelter?

That you get it wrong.

Again, I'm not a lawyer so I could be mistaken but have a look here to get an idea of the complexities that can emerge

http://www.taxationweb.co.uk/forum/discuss.php?id=1619

Regards

Cheerfulcat

seabright

Cheerfulcat's right, you don't need a lawyer to draft it, but there are very strict rules about drafting deeds (as opposed to other types of documents), and not adhearing to them could invalidate the deed and undo all your tax saving intentions.

Also, without knowing all the circumstances of your and your late wife's assets I can't see whether your plan is feasible, especially as the Inland Revenue will not allow "gifts with reservation".

But, I think the most important thing is that you may be able to save more, now and in the future, and only a lawyer in possession of all the facts will be able to properly advice you.

willam

Cheerfulcat, many thanks, the link is especially interesting.

I intend to sample cost estimates from solicitors, and also try an informal approach at my local tax office.

It will take a week or two, but I shall leave the the thread open.

Thanks again, willam

willam

seabright: Thanks, I'm searching for any rule for deeds such as a proforma; without success so far. I must add there are no reservations in the redirection of my share to the children.
On your important point, I entirely agree with you, that it is better to be safe than sorry.

Thanks again for your comments, willam.

Bossyboots

willam wrote:

seabright: Thanks, I'm searching for any rule for deeds such as a proforma; without success so far. I must add there are no reservations in the redirection of my share to the children.
On your important point, I entirely agree with you, that it is better to be safe than sorry.

Thanks again for your comments, willam.

To be honest, the errors in your first post are reasons I would strongly recommend you see a solicitor.

As you now know, it is a Deed of Variation to effectively change your wife's will that is required.

Also, the approach you suggest about writing out your wishes and then getting your sons to witness the document is guaranteed to make it void. A document in that form would actually be a Codicil to your will. It should be executed in the same way as a will, with two independent witnesses who are not beneficiaries of the will or the codicil. Otherwise, it has no legal status. It is definitely not a tool to help with tax efficient passing of an estate.

I do think you would be very unwise to attempt this yourself. Even if it looks easy, one little mistake and the document is invalid. I have posted here before of my tale of a lady who executed a DIY will believing she had done it all correctly but in fact she had not. The fallout from what was one simple error still rumbles on and her estate has passed to the wrong person, who has not been honourable enough to even share it with the deceased's intended beneficiaries, much less give up his claim to it.

willam

Bossyboots: Thanks, you have given me food for thought. What error did I make in my first post, other than 'Variance' misnomer?

I shall need to check your assertion that my children signing the deed makes it void,- certainly true for a will, but I read that it is necessary for all beneficiaries to sign they agree to the variation. The following extract suggests the deed need be for tax purposes only....

"Any correctly prepared variation results in the provisions in the Deed of Variation being treated for Inheritance Tax purposes only, as if those provisions were contained in the deceased's Will or were the result required where there is no Will."

It doesn't quite fit your description, but I am grateful for your comments, and you have given leads it would be foolish for me not to follow up. I confess it's not yet clear to me.

I can give source of extract but I'm really hoping to find more detailed answers.

Thanks again, willam

cheerfulcat

I must add there are no reservations in the redirection of my share to the children.

The term " gifts with reservation " is a legal one. If you understand this -

http://www.hm-treasury.gov.uk/media/96C/55/Finance03_clause7.pdf

then by all means go ahead and DIY. By which I mean " don't ".

"Any correctly prepared variation results in the provisions in the Deed of Variation being treated for Inheritance Tax purposes only, as if those provisions were contained in the deceased's Will or were the result required where there is no Will."

Please, just go to a solicitor.

willam

cheerfulcat: I'm curious, intrigued, by legal tag on gift reservation, but can't access the link. I get to the Treasury site but not past /media/ in the address. I checked firewall. Have tried .. /documents/ ...this led to pdf's, but lost it after that.

Now stopped the search, have to go out, hope/expect to be back later pm.

I'm stubbon as a mule, but listen to good argument. Thanks, willam.