Hi
My father passed away last year and I have completed probate and am now, as an executor, in a position to distribute the residual estate. My mother, as the sole beneficiary, wishes to pass the residual estate to myself and my sister, so I am currently preparing a Deed of Variation. My question is in relation to how specific the wording needs to be in order to have legal validity. The proforma I am using simply asks for the new beneficiaries, but not the percentage split; is it legally assumed that the split will be 50% each (which it will)? Many thanks
Hi, so sorry to hear of the passing of your father. Whilst we can not provide you with specific advice in this forum, the following generic information will hopefully help.
We don’t currently have a proforma deed of variation on the site, but will look at adding that (with explanatory notes). As a general rule, you would expect a deed of variation to refer to the will (in particular the part of changed) and then set out the gift as if it were in in the will made by the deceased. So yes, you would expect it to be worded in such a way to specify the gift including proportions. If you haven’t already, do take a look at our article on deeds of variation.
One thing does spring out of your query and it is the question of what motivates the change being made? In particular, if it is for the purposes of Inheritance tax (IHT) planning, do remember that a deed of variation re-directing residuary estate to someone other than the surviving spouse has the effect of reducing the transferrable nil rate band by the amount of the variation. Indeed, in the sorts of circumstances you describe, it can even be a worthless exercise (depending on particular circumstances). Separately but sort of related to that point is whether you need to even bother with a deed of variation come what may. Again, this is NOT legal advice, but the general point to be mindful of is that a redirection of residuary estate away from surviving spouse can, in the right circumstances simply be done by them making a gift (a Potentially Exempt Transfer – known as a PET). Again, this all depends on the reasons for wanting to do it and the particular financial situation. BUT, once a deed of variation is done, the amount of gift results in that amount being lost in the transferrable nil rate band. If instead the surviving spouse makes a PET, the transferable nil rate band remains in tact and can be claimed on second death. And, if the survivor lives themselves for more than 7 years, the PET will totally disappear too! If they die within 3 years the gift is pulled bac into their estate, BUT, remember that the preserved transferable nil rate band remains in tact making it a benign point. And, after 3 years, the ‘Taper Relief‘ rules will apply – potentially creating amore advantageous outcome.
Have a look at our article on Lifetime Gifts.
Thanks once again for reaching out to QLAW. We hope the above is a help!
