please explain the deed of variation

joe06

My mum just passed away and i currently my dad gets everything.

he wants to pass it to me now.

We have heard that a deed of variation will stop inheritance problems in the future.

can i make / get a deed of variation without a solicitor? how ? or where?

does anyone have a template?

edit - there is no property involved
there may be no iht problems now but we are planning for the possibility that my granny dies and therefore increases the money my dad has will be more and then iht problems...

thanks mse

Mikeyorks

Some thoughts for you in this current thread :-

http://forums.moneysavingexpert.com/showthread.html?t=1581685

p00hsticks

My understanding is that a deed of variation allows the beneficaries of a will to effectively say that they want the bequest to go to someone else other than them.

So your dad could arrange to apply to 'vary' your mums will so that everything that she willed to go to him goes to you instead.

Note that now that the nil-rate tax band is transferrable between spouses, there isn't really any IHT benefit in doing this any more.

Also note that it's possible that the DWP / local council may still consider your father to have the inheritance for the purpose of evaluating means tested benefits and/or any future care home contributions, as he will have voluntarily deprived himself of the money.

And if part of your mother's estate includes her share of the property your mother and father live in then there are complications if her share passes to you rather than him - if your father continues to live in the property without paying you a market rent for your share then it's a 'benefit with reservation' and the house will remain in his estate for IHT purposes. And when you come to sell it, unless you are living in the property as well, you will be liable to pay Capital Gains Tax on your share. So there's a double tax whammy there.

(If the property is owned as 'joint tenants' rather than 'tenants in common' then the property will autiomatically pass to your father anyhow).

Also there's a moral consideration. If your mother had wanted you rather than your father to have her estate, she could have easily made a will to that effect, but she decided not to.

joe06

NOTE - there is no property involved.

thanks for your help.

mancmum

Hi there

I am also interested in the impact of a deed of variation on means tested benefits. In this case the deceased was intestate. If the recipient of the in heritance is unable to make a deed of variation because they were on benefits this could potentially make the intestacy laws much harsher than they were intended to be.

Johnhowell

Mancmum,

If someone on means tested benefits receives a legacy under intestacy rules, and the amount exceeds the thresholds (16k?) then the benefits would have to be reassessed. As long as they do not squander the funds - expensive holidays,etc. once the money goes below the threshold, the reassessment can be carried out to see if they are due the benefits again.
If they did a variation - so they did not loss a benefit - they may loss it any way as it could be assessed that they squandered it by handing to their children.

Why should they receive benefits when they have that money in the bank? Why would they reliquish this money, just to get a little extra a week in benefits?

mancmum

Hi John,

If nana could drive, apparently she would be allowed to use the legacy replace a car. If she had been rich enough she might have been able to buy a house and this would be disregarded for means tested benefits. If she had been very very rich it would be legal to alter the terms of the will to avoid hundreds of thousands of pounds of inheritance tax.

But she is poor, she has been poor all her life - stretching money to add to a dinner ladies wage.

In her 80 years she has had very, very little. Her clothes are bought second hand, there is little fresh fruit and veg. She has given her body to medical science so her son doesn't have to pay for a funeral.

She's lived on benefits for 30 years since retiring, despite working and contributing to society.

It seems that they way the rules for benefit are applied mean that even when she is off benefit she must still consider her return to benefit and must spend her money in certain ways. She probably couldn't give her grandson's a present.

For one, I'd like a little bit more info about how this works so that she can make the best choices for her. Its exactly the same sort of thing that rich people do. If tying the money up in a trust might mean that an old lady could buy a lamb chop a week for 10 years as opposed for 2 then that actually is what will make a different to her life and I don't have a problem with it.

That's why it might be better to tie the money up instead of just using it to live at a basic level so that she may return to benefits at a later date.

John_Pierpoint

On an intellectual level: The government has no money of its own, only what it can honestly tax from its citizens or what it dishonestly prints.
In most countries of this world (and interestingly including Germany) the younger generation are legally responsible for keeping their elderly relatives.
As our current bankrupt government gets deeper and deeper into debt, don't expect much of an increase in benefit hand outs.

EricBaker

My wife was in a similar position, wanting to give her sister and brother some of a legacy she received from her godmother without giving them potential IHT hits. We'd already used our £3k pa gift allowance. Try as I might I couldn't find a sample deed of variation on the web, just offers to sell one to me. But the HMRC IOV2 form - Instrument of Variation Checklist - is helpful. We didn't want to waste loads of a small legacy on lawyers so I drafted an Instrument of Variation (doesn't need to be a formal Deed) and called the HMRC IHT helpline - there was a very helpful guy the other end. I described what the Instrument I'd drafted contained and he said "Yes, that sounds good - just get it signed, witnessed and put it with the will, with our checklist, for 7 years, just in case." So, I'm no lawyer but here's the generic version of what I put together, with made up names:

Template
Instrument of Variation
I, Ann Bethany Cleaf, of (address) was left a sum of £3,000.00 through the will of my godmother, Phyllis Martha Smith, of (address), who died on (date).

I would like to vary the effect of the will to redirect £2,000.00 of the £3,000.00 I received from Phyllis Smith as follows:
• £1,000.00 for my brother Neil Salter of (address)
• £1,000.00 for my sister Yvonne Dumas of (address)

The parties to this variation intend that the provisions of section 142(1) Inheritance Tax Act 1984 shall apply.

Signed by Ann Bethany Cleaf
Date
Witness (name, address, signature, date)

SeniorSam

EricBaker wrote: »

My wife was in a similar position, wanting to give her sister and brother some of a legacy she received from her godmother without giving them potential IHT hits. We'd already used our £3k pa gift allowance. Try as I might I couldn't find a sample deed of variation on the web, just offers to sell one to me. But the HMRC IOV2 form - Instrument of Variation Checklist - is helpful. We didn't want to waste loads of a small legacy on lawyers so I drafted an Instrument of Variation (doesn't need to be a formal Deed) and called the HMRC IHT helpline - there was a very helpful guy the other end. I described what the Instrument I'd drafted contained and he said "Yes, that sounds good - just get it signed, witnessed and put it with the will, with our checklist, for 7 years, just in case." So, I'm no lawyer but here's the generic version of what I put together, with made up names:

Template
Instrument of Variation
I, Ann Bethany Cleaf, of (address) was left a sum of £3,000.00 through the will of my godmother, Phyllis Martha Smith, of (address), who died on (date).

I would like to vary the effect of the will to redirect £2,000.00 of the £3,000.00 I received from Phyllis Smith as follows:
• £1,000.00 for my brother Neil Salter of (address)
• £1,000.00 for my sister Yvonne Dumas of (address)

The parties to this variation intend that the provisions of section 142(1) Inheritance Tax Act 1984 shall apply.

Signed by Ann Bethany Cleaf
Date
Witness (name, address, signature, date)

No good without signatures of any other beneficiary

Sam

dzug1

SeniorSam wrote: »

No good without signatures of any other beneficiary

Sam

Really? ICBW but I thought it was only beneficiaries adversely affected by the variation that had to sign