We are regularly instructed by overseas solicitors whose clients have assets in Scotland, while domiciled overseas.
What is a Deed of Variation and how can it help reduce Inheritance Tax?
When somebody dies, their affairs must be wound up and everything they own needs to be distributed to those entitled to inherit (the beneficiaries). How their estate is distributed will depend on either the terms set out in their will or the rules of intestacy should a will not exist. There are occasions when the beneficiaries of the estate may want to rearrange their entitlement from the deceased’s estate, and this can be done with a legal document called a Deed of Variation (DOV).
In this blog, we will discuss reasons for adjusting the distribution of an estate, how a DOV works to mitigate tax, what happens when there is no will, how to ensure a DOV is valid, and who the inheritance can be given to.
If you have any further questions regarding post-death tax planning, please get in touch with our specialist lawyers at Wilson & Fish today.
Within two years of someone’s death, the beneficiaries of the estate can vary their personal entitlement. There are numerous reasons why beneficiaries may choose to redirect money they stand to inherit, including:
- If the will isn’t written in the most tax-efficient way,
- If the deceased has not updated their will and inadvertently left someone out,
- If the distribution is not equal between beneficiaries,
- If no will has been written, or
- To clear up any uncertainties within the will.
In order to dilute the amount of IHT payable on the deceased’s estate, a variation can be made that redirects the money to other beneficiaries or directly to a charity. For example, if the person’s estate is worth more than £325,000 then anything above the threshold will be taxed at 40 per cent. The beneficiaries, therefore, may choose to alter their inheritance to reduce or eliminate the amount of tax that would otherwise need to be paid. Additionally, if the beneficiaries were to change the distribution of assets and gift 10 per cent of the overall estate to a charity, the rate of IHT paid on the deceased’s estate would reduce from 40 to 36 per cent.
It’s important to note that if the DOV changes the amount of IHT due on your loved one’s estate, then a copy of the letter must be sent to HM Revenue & Customs (HMRC). If you’re considering rearranging a loved one’s will for IHT purposes, get in touch with our specialist lawyers today.
"I instructed Wilson & Fish to wind up my mother's estate. They were helpful, explained every step of the process and were responsive to my queries." - George McLachlan
If someone has died intestate and all beneficiaries agree the rules of intestacy do not generate the best outcome, then a DOV may be considered. As long as the change is completed within two years of death, this will allow for the redirection of the estate to another and is treated as being made by the deceased rather than the beneficiary.
There are no formal documents you have to apply for, instead, you must write a formal letter explaining the alterations you wish to make to the estate distribution. To ensure that the change is valid and recognised by HMRC, certain conditions must be met:
- It must be in writing
- It must be executed within two years of the death
- It must be signed by all beneficiaries who would lose out as a result of the change
- It must clearly state the parts of the estate being altered and who will benefit
Provided everyone involved agrees on the variation, you can redirect your entitled inheritance to anyone you may wish, even if they are not named in the deceased’s original will. However, should the alteration affect anyone under the age of 18 years old, then the approval of the court would be needed.
"I found the frequent progress updates very helpful and the time taken to deliver the expected results were excellent. I would have no hesitation in recommending..."
H MacSween, Glasgow, Scotland
Contact our Specialist Executry (Probate) Lawyers Glasgow, Scotland
If you want to alter the distribution of a loved one’s estate, it is always recommended to get legal advice from a qualified solicitor. At Wilson & Fish, we can provide you with first-class guidance on changing a will after someone’s death and advise on the best course of action for your particular circumstance. Based in Glasgow, we help clients throughout Scotland including Ayrshire, Edinburgh, Aberdeen, Dundee, Paisley, East Kilbride and Stirling. Get in touch today by calling 0141 222 7951 or you can request a callback by filling out our online enquiry form.
We can help with
The death of a loved one is a difficult and stressful time. Our Scottish executry solicitors, based in Glasgow, can help bring your loved one’s affairs to a swift conclusion.
The death of a loved one can be a traumatic and emotional event, we understand this and can offer clear, impartial advice on all aspects of obtaining confirmation.
Wilson and Fish act for lawyers and clients all over the world. We can help you wind up a loved one’s estate in Scotland wherever in the world you are located.
Why Choose Us?
We are a niche firm specialising in Executry, Probate & Estate Administration.
Our basis for charging fees is always made clear at the start. We do not charge on the value of the Estate. We can offer fixed fees in many cases.
Communication is at the heart of what we do. Our solicitors will ensure you are fully informed throughout the process.
"Thank you for following up with Scottish Power to resolve the issue of amount owed to the estate of the late Marjory Friel. I'd also like to thank you, Mark and the whole office for your expertise and diligence in settling the estate. I plan to visit Glasgow on my visit to the UK."
L. Thompson, Sanbruno, California
Wilson & Fish
Wilson and Fish Solicitors are a firm of Scottish solicitors specialising in executry / probate. We are based in Glasgow but act for clients throughout Scotland and abroad.
We also advise foreign solicitors in connection with their clients’ estates based in Scotland.
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Our lawyers and advisors provide clear and unambiguous advice to help our clients plan for their future. At difficult and painful times following bereavement they provide sympathetic assistance to guide our clients through what can be complicated and sensitive issues.