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What is a deed of variation?

What is a deed of variation?

Do you know about the use of deeds of variation for IHT planning? Read on to learn more. This article will be of interest to those studying for their CII J02, R06, AF1 or AF5 exams.

Deeds of variation have often been threatened in the past, with governments stating they will be under review for IHT planning.  Nothing ever seems to change though, so we carry on using them as a legitimate way to re-arrange someone’s affairs after death – not just to save tax – but to ensure estates are passed on correctly and, at times, to allow widows or widowers to stay in their home.

What is a deed of variation?

A deed of variation is a document which allows the beneficiaries of someone’s estate to change the deceased’s will up to 2 years after they’ve died (as long as they are over 18 and of sound mind of course!).  Also, it’s not just a will that can be re-written; the laws of intestacy, where someone has died without a will, can also be changed.

They’ve been a long and well used method for many years now; they are used to set up discretionary trusts but also to allow families to skip a generation.

 

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An Example

Imagine that Bill has died and has left his estate to his son, Edward.  Edward is already concerned about his own Inheritance Tax problems so decides to amend his father’s will using a deed of variation and re-directs the inheritance to his own children; Bill’s grandchildren.  Using a deed of variation ensures that Edward hasn’t made a gift himself (and therefore avoids the usual need to survive 7 years) and also avoids worsening his own IHT situation.

The advice, of course, has always been that individuals write a will and for this to be reviewed regularly to ensure it still does what it’s supposed to do.  A deed of variation is essentially post-death planning and should never have been thought of as a substitute for pre-death planning.

Over to You…

Can you remember what the rules are for those wishing to put in place a deed of variation?  They often get tested at AF1 level, so anyone studying for this exam should ensure they know the relevant points.

Grab the resources you need!

If you’re studying for your CII AF1 exam, and you’re not feeling 100% confident of a pass, grab our free taster to try out one of Brand Financial Training’s calculation workbooks for yourself.  Click the link to download the AF1 Calculation Workbook taster now!

Click here to download our free calculation workbook taster for CII AF1

Alternatively, you can download the taster for J02, R06 or AF5 if one of those exams is causing you to worry.