Gift of Hindsight & Deed of Variation, Glasgow, Scotland

What is a Deed of Variation?

A Deed of Variation in Scotland is a legal document that allows beneficiaries of a deceased person’s estate to alter the distribution of the assets specified in the deceased person’s Will or intestacy (if there is no Will).

In Scotland, when a person passes away, their estate is typically distributed according to their Will or the rules of intestacy if there is no Will. However, there may be situations where beneficiaries wish to change the way the assets are distributed. This could be for various reasons, such as tax planning, addressing changing family circumstances, or achieving a more equitable distribution among beneficiaries.

The Deed of Variation allows beneficiaries to rearrange the distribution of the estate after the death of the testator (the person who made the Will) in a way that is legally recognised. The document must be executed in accordance with the relevant legal requirements, so its important to get expert legal advice, and it should be done with the agreement of all affected beneficiaries.

Why would I want to change a Will after death?

Everyone has a different set of circumstances but common reasons for changing a Will after death include:

• Choosing to allocate a portion of your share to benefit someone else
• Expressing a desire for a portion or the entirety of your inheritance to support charity
• Addressing the omission of children or grandchildren who were born after the initial drafting of the Will
• Seeking to achieve a more equitable distribution among beneficiaries within the family. For instance, rectifying imbalances where one child receives a smaller share than others
• Exploring options for a tax-efficient restructuring of the estate distribution.

What changes can be made after the deceased’s death?

You have the exclusive right to modify your individual portion of the inheritance, and the specifics can be customised to suit your preferences, whether opting for simplicity or complexity. Consider the following options:

• Reallocate specific assets to intended recipients
• Gift your entire entitlement to someone else
• Establish a trust for your portion

It’s noteworthy that the recipient of your entitlement doesn’t necessarily need to be initially named in the Will. While your modifications are limited to your own entitlement, deeds of variation are commonly employed to collectively adjust the estate distribution for the benefit of all beneficiaries. This allows beneficiaries to collaboratively decide how each person’s share should be amended.

Changes that cannot be made

A deed of variation is not applicable for the following purposes:

• Altering other individuals’ inheritance without their explicit consent
• Increasing your own share of the estate, unless another beneficiary willingly gifts a portion to you
• Modifying the appointed executors or guardians named in the Will

If you encounter challenges with an executor, the individual responsible for estate administration, we can assist you in taking necessary steps to address and resolve your dispute.

Considerations when making a Deed of Variation

When crafting a Deed of Variation, it’s crucial to assess its impact on the entire estate. Lowering your share, for instance, might increase the inheritance tax liability for the executors, necessitating their agreement. Prior to implementing any alterations, it is imperative that all parties comprehend the potential repercussions and, when required, provide their consent to the proposed changes. Challenges may arise if one of the beneficiaries either withholds consent or lacks the legal capacity to do so, such as in the case of a minor.

It could be beneficial to seek expert legal advice in advance of making a decision on a Deed of Variation to discuss issues such as capital gains tax, more inheritance tax, general tax implications or a more tax efficient way.

What is the time frame to set up a Deed of Variation?

You can set up a Deed of Variation either before or after the executor obtains the Grant of Probate or the Certificate of Confirmation to start administering the estate. For tax reasons any changes must be made within two years of the person’s death.

Setting up Gift of Hindsight

A Gift of Hindsight can protect half the estate against care costs and inheritance tax.

When someone dies, whether a spouse, partner or parent, that inheritance is protected in a Will Trust and does not become part of their estate. This can save the family thousands of pounds.

With a Gift of Hindsight, we change the deceased’s will and put the assets into a Will Trust for the benefit of the survivor and the children. We can arrange this, even if the deceased didn’t leave a ill.

As an example, a couple had an estate of £400,000. One partner dies. The other partner inherits and then dies with the whole £400,000. Since they are not married, the survivor only has a £325,000 allowance and therefore the other £75,000 is subject to 40% inheritance tax (IHT).

With a Gift of Hindsight, we change the first partner’s will to put £200,000 into a Will Trust, which will be exempt from IHT as it’s below the limit. When the survivor dies, their estate is also below the limit and therefore there is no IHT to pay. In other words, by using the Gift of Hindsight or Deed of Variation, we use two Nil Rate Band Allowances for IHT rather than just one.

Another advantage of the Gift of Hindsight is that it ensures that your inheritance goes where you want it. You keep control during your lifetime and your trustees ensure that your wishes are honoured after you die.

Contact us today for professional advice

If you and all the beneficiaries of a deceased’s estate would like to make changes to a Will or if there was no Will in place, then contact us today for specialist advice. You can call us on 0800 292 2034. We can provide absolute clarity on variation details, specific assets, discuss details on intended recipient and capital gains tax.