Sometimes the generosity of a friend or relative leaving you a gift in their will can backfire if it turns out your estate will need to pay tax on it or if there is a chance that it could be swallowed up in future care costs or in satisfying some other type of claim. It may also be the case that a will prepared many years ago does not take advantage of new tax allowances on death, such as that which now applies when you leave a share of your home to your children or other descendants.
To cater for these sorts of situations it may be possible for the provisions of a will to be varied to better suit your needs or to ensure tax efficiency where possible. Elliot Lewis, wills and probate lawyer with Thackray Williams explains more.
‘If you have been left a gift in someone’s will and you are worried that as a result the value of your own assets when you die may be pushed above the rate at which inheritance tax becomes payable, then it is a good idea to talk to a solicitor about the possibility of varying the will to divert your inheritance to someone else.’
‘It is also advisable to seek advice’, says Elliot, ‘if you are starting a new relationship and are anxious to protect your inheritance in case the relationship breaks down, or if you and others named in the will are keen to make provision for people not currently provided for, such as grandchildren of the deceased who were born after the will was prepared.’
How can a will be varied?
To bring about some changes, such as to benefit someone who is not currently named in the will, you can simply give away some of your inheritance. However, before doing this you will need to consider whether there could be any adverse tax consequences, such as liability for inheritance tax arising under the potentially exempt transfer rules if you die within seven years of the gift being made.
The other option to effect a change is via a formal legal document, known as a deed of variation.
Which option is right for you will depend on the circumstances but there are formalities that need to be complied with for a deed of variation to be effective.
To avoid any adverse inheritance or capital gains tax implications, a variation will need to:
- be made within two years of the deceased person’s death;
- be recorded in writing;
- make it clear how the will is being varied, ie the nature of the gift you are
- foregoing and who you are passing it on to;
- be signed by you, as the original beneficiary; and
- not involve any reward from your point of you, ie not be made in return for you receiving some other benefit in lieu of you giving up some of your inheritance.
It is important to take legal advice to ensure all formalities are complied with, particularly where the variation is to be made by deed given that arrangements cannot subsequently be changed.
Who can make a variation?
It is possible for anyone who stands to benefit under the terms of a will to seek a variation. It is also possible in some situations for the executors or personal representatives of the deceased person to suggest a variation is made. There are additional requirements where the variation being considered will increase the estate’s tax liability or where beneficiaries under the age of 18 will be affected.
What about intestate estates?
If you stand to inherit under the intestacy rules because your relative failed to make a will, then it is still possible for you to make a deed of variation to give away some or all of your inheritance to someone else.
Can I just refuse to accept my inheritance?
Whether you have been left an inheritance through a will or the rules of intestacy you are entitled to decline to accept it but if you do this you will have no right to then dictate who should benefit instead. If you are uncomfortable about this then it might not be the way to proceed.
If you have received an inheritance which you are not sure you want to accept, or if you have some other reason for wanting to vary the terms of a will or the rules of intestacy, please contact Elliot for advice on your options.