Is a Deed of Variation worthwhile?
Discussion
When my dad died last year, he naturally left everything to my mum as part of a mirror Will.
It was a reasonable sum of money all told and she has said that she doesn’t really want/need it and would like to pass it on to me (only child) so that I can distribute to my two kids and have some for myself.
Is a Deed if Variation a good way to do this, rather than gifting the entire lot to me?
Some resources seem to suggest it is and some say not so much. Am confused as to what to do.
It was a reasonable sum of money all told and she has said that she doesn’t really want/need it and would like to pass it on to me (only child) so that I can distribute to my two kids and have some for myself.
Is a Deed if Variation a good way to do this, rather than gifting the entire lot to me?
Some resources seem to suggest it is and some say not so much. Am confused as to what to do.
My father died in ‘92 so can’t comment on what’s relevant in terms of HMRC rules but my sister and I were the sole beneficiaries of his will (messy divorce from my mother many years earlier). We did a Deed of Variation (as I remember had to justify the reasons) to gift some money to my mother as we realised we would have to help her financially in the future. Reduced the IHT bill successfully.
You need professional advice though as from what I remember we needed to justify it...you can’t just do it to reduce IHT without HMRC looking at it. If there isn’t an IHT angle I’d suggest it’s a good thing to do because of the rules around gifts to you/your kids which would apply if your mother gifted to you or your kids (gifts 7nyears before death get caught)
You need professional advice though as from what I remember we needed to justify it...you can’t just do it to reduce IHT without HMRC looking at it. If there isn’t an IHT angle I’d suggest it’s a good thing to do because of the rules around gifts to you/your kids which would apply if your mother gifted to you or your kids (gifts 7nyears before death get caught)
If stuff is given to you it becomes part of your own estate and could potentially result in a higher overall IHT bill than gifting direct to the kids.
A Deed of Variation is well worth considering if it's expected to improve the IHT position somewhere down the line. That's how/why they are normally used.
[Otherwise a DoV might be used amongst 3 brothers and sisters if one of them had been cut out of a parent's Will, but after death the brothers and sisters agree it would be fairer for all 3 of them to have equal shares.]
A Deed of Variation is well worth considering if it's expected to improve the IHT position somewhere down the line. That's how/why they are normally used.
[Otherwise a DoV might be used amongst 3 brothers and sisters if one of them had been cut out of a parent's Will, but after death the brothers and sisters agree it would be fairer for all 3 of them to have equal shares.]
Not sure you could do 3 D of Vs though? i.e. one to me and one to each of my kids?
I presumed that it would be one to me for the whole amount and then for my to divi it up between me and them (I’d put their portion into a trust so they could have some when they reach 21, some more when they get to 25 and the balance when they are 30 or want to buy a house, whichever is first)
Gawd, it’s so confusing!
I presumed that it would be one to me for the whole amount and then for my to divi it up between me and them (I’d put their portion into a trust so they could have some when they reach 21, some more when they get to 25 and the balance when they are 30 or want to buy a house, whichever is first)
Gawd, it’s so confusing!
pincher said:
When my dad died last year, he naturally left everything to my mum as part of a mirror Will.
It was a reasonable sum of money all told and she has said that she doesn’t really want/need it and would like to pass it on to me (only child) so that I can distribute to my two kids and have some for myself.
Is a Deed if Variation a good way to do this, rather than gifting the entire lot to me?
Some resources seem to suggest it is and some say not so much. Am confused as to what to do.
Your mum could gift it to you, and you could then gift it to your kids.It was a reasonable sum of money all told and she has said that she doesn’t really want/need it and would like to pass it on to me (only child) so that I can distribute to my two kids and have some for myself.
Is a Deed if Variation a good way to do this, rather than gifting the entire lot to me?
Some resources seem to suggest it is and some say not so much. Am confused as to what to do.
But you and your mum would both need to live for seven years after making each gift for those gifts to be free of inheritance tax.
If the Will can be varied to make these gifts directly then it removes that risk.
But bear in mind that if your parents were married then your mum will probably have benefited from the spousal exemption. If the Will is varied to leave funds directly to you, that exemption would not apply.
You really need professional advice to decide whether this is worth doing.
), so she did get spousal exemption. Was used in my family by some beneficiaries already at pension age & with potential IHT issues of their own to pass directly down a generation or two. In this scenario it was worthwhile if cash was not needed & already trying to figure out passing stuff on.
Basically as I recall you can choose to re-direct all or some of your share however you see fit, this could be lump sums to grandkids if that was desired.
Basically as I recall you can choose to re-direct all or some of your share however you see fit, this could be lump sums to grandkids if that was desired.
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