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The benefits of the Deed of Variation

A Deed of Variation (DOV) is a document that allows a will (or indeed the rules of intestacy) to be formally varied for a period of up to two years following the date of death of a Testator. It requires the consent of any person who loses a beneficial interest in an estate as a result of the DOV but save thereto is a very useful tool to correct injustices caused by a will and, in particular, to reduce existing or future Inheritance tax (IHT) liabilities.

Here are some of the key reasons to use a Deed of Variation:

  1. To correct an injustice in a will – for instance, equalising legacies between grandchildren.

  2. To incorporate the spouse exemption, if available, to avoid all immediate IHT due.

  3. To create Trusts that benefit existing beneficiaries but in a tax efficient manner so that the estate of the beneficiary will not acquire their own additional liability as a result of the will or intestacy.

  4. To vary a will so that the full extent of the new residential nil rate band can be utilised if it would otherwise be lost as a result of the terms of the will.

  5. To make gifts to charitable institutions up to the relevant 10% share of the estate to allow a reduction of the IHT paid to 36% (from 40%).

As always, the facts of each case will differ and each case must be judged on its own merits and we shall set out some interesting case studies in future articles. However, in any estate it is certainly worth considering whether a DOV could be utilised to further benefit the existing beneficiaries of an estate (by, for example, significantly reducing an IHT liability) or other beneficiaries who would otherwise lose out.

At Solomons Solicitors, our expert solicitors have significant experience in dealing with Deeds of Variation. If you would like a no obligation meeting to discuss your options, please do not hesitate to contact us on 01202 802 807 or by email at office@solomonslaw.co.uk.

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