The government has recently announced that it is reviewing Deeds of Variation as part of the 2015 Budget, hinting that they may be looking to alter or close the ability to change a Will after death as it has become an efficient way for beneficiaries to avoid certain taxes after a death. Unfortunately, the government fail to realise this is also a way of providing for loved ones.
So how does it work?
A deed of variation allows beneficiaries to change the distribution of an estate up to 2 years after a death. This is to allow families to make any necessary changes so their entitlement is less affected by tax.
An example being; if you are the sole beneficiary of an estate, you may potentially pay inheritance tax of 40% on whatever is left to you over a certain threshold, currently £325,000 per person. A deed of variation would allow you to change a will and the amount left to you and potentially allow you to mitigate inheritance tax.
In a high profile case involving former labour party leader Ed Miliband, the MP was accused by the Conservatives of avoiding inheritance tax by moving ownership of some of the family home into his and his brother’s names after his father died. Although the Labour party leader denied any tax benefits from this deed of variation, it has highlighted how high net worth individuals could be at risk of facing huge tax bills should these changes go ahead.
The Chancellor has promised a crackdown on inheritance tax avoidance which will affect deeds of variations as part of the initiative to raise £3.1 billion for the 2015 Budget. Unfortunately this move could affect thousands of beneficiaries as this completely legitimate way of providing for loved ones is now facing potentially damaging changes.
The expert solicitors at Stephensons have serious concerns about this review.
“A deed of variation is a way of ensuring estates pass to families in instances where there is either no will present or where circumstances have changed and should not just be viewed as a tax avoidance loophole.
In situations where a loved one has died without a will, a deed of variation can ensure a widower/widow can stay in their home. Considering that nearly two thirds of the public do not have wills, a deed of variation helps provide for heirs. It should not just be considered as a vehicle for tax avoidance.”
The expert solicitors at Stephensons would like to urge those who have any issues regarding deeds of variation to come forward as these changes may cause families to lose out on what is rightfully theirs.
If you would like to speak to someone about your will or would like to speak to an expert solicitor about a deed of variation, call 0175 321 6399 today.