A deed of variation gives beneficiaries of an estate a two-year window to alter the distribution of that estate following the death of the owner of that estate.
Changing the distribution arrangements can reduce the amount of inheritance tax or capital gains tax payable. It can also allow the deceased’s assets to be moved into a trust, or can resolve uncertainty over the Will.
In March, the chancellor of the exchequer George Osborne announced plans to review the deed of variation ruling as part of the UK’s clampdown on tax avoidance.
Serious worries
Paul Hill, chair of the ATT’s technical steering group, which looks after the general compliance and administrative issues faced by the body’s members, said it would be “a mistake” for HM Revenue & Customs to assume that deeds of variation are predominantly used to reduce tax.
“This would be to ignore their significance in helping people to deal with the death of a loved one in an orderly way, often in anguished circumstances,” he said.
“Abolition of the facility would cause bereaved families serious worries where a Will is found to be defective or where a death suddenly occurs and there is either no Will or the most recent Will does not account for a change in family circumstances.”
Discrimination
The ATT warned that less well-off families are likley to suffer the most from any restriction or removal of deeds of variation.
The association pointed out that wealthier families are able to settle their estates on discretionary Will trusts, which means trustees can obtain the same outcome that is currently available to everyone through a deed of variation.
