A Deed of Variation, which must be signed in the presence of two witnesses, is often used by a beneficiary to redirect some or all of their inheritance.
Covid restrictions made it difficult for a beneficiary to execute a Deed last year but we adapted to the circumstances and offered an alternative solution.
Redirecting inheritance when someone dies
When someone dies, a beneficiary may want to redirect some or all of their inheritance to someone else. This could be for tax reasons or to provide for another, who is more in need of the funds. For a variation to be effective, any beneficiary who will be left worst off by the change must agree to it and the variation must be made within two years of the death.
Beneficiaries under an intestacy, where there was no Will, can also vary how the estate is distributed. The variation is treated as having been made by the deceased rather than the beneficiary and avoids a charge to Inheritance Tax or Capital Gains tax for the beneficiary.
Executing a Deed of Variation
The most common way to vary a Will is by executing a Deed of Variation. Each party to the Deed must sign in the presence of two witnesses. This has sometimes proven difficult to arrange with Covid restrictions in place. Although the Wills Act 1837 was amended to allow for the virtual witnessing of Wills, a deed must still be signed in the physical presence of two witnesses.
Last year we helped an elderly beneficiary vary her husband’s Will. The client was in hospital so a Deed of Variation was going to be difficult to execute; the hospital staff were not able to act as witnesses and visitors were not allowed onto the ward. The second anniversary of her husband’s death was also fast approaching.
Instrument of Variation
To overcome these problems, we drafted an Instrument of Variation, rather than a Deed of Variation. The document only needed to be signed by the beneficiary, without the need for witnesses.
Provided certain conditions are met, an Instrument is just as effective as a Deed in changing a Will and ensuring the variation is “written back” into the Will or intestacy rules for Inheritance Tax and Capital Gains Tax purposes.
How Moore Barlow can help
At Moore Barlow we adapt to changing circumstances and offer alternative solutions to our clients, as this recent example shows. If you require expert legal assistance in this area, please contact us today.