Will the Autumn Budget Call Time on Deeds of Variation?

A Deed of Variation is a document that can be prepared and executed up to two years after someone’s death. It varies the terms of the deceased’s Will and can have Inheritance Tax and Capital Gains Tax benefits.

It effectively rewrites certain terms within the deceased’s Will and can be used to correct mistakes, divert monies to other beneficiaries, and maximise available tax reliefs.

It is commonly used to gift money to adult children of the original beneficiary as an ‘advancement’ of their inheritance. This means that the original beneficiary can see the new beneficiary enjoy their gift and will at the same time, reduce their own estate subject to Inheritance Tax on their death.

Should the legislation change to no longer allow individuals to prepare Deeds of Variation to vary the terms of a deceased’s Will, gifts to family members will have to be made traditionally, with the risk of using your Nil-Rate band if you do not survive seven years.

In addition, a further proposed change for Inheritance Tax would be to introduce a lifetime gifting allowance of £30,000, which would be separate from the £325,000 allowance on a person’s death estate. This will remove the seven-year gifting rule and allow individuals to gift up to £30,000 across their lifetimes before attracting Inheritance Tax.