Deeds Variation - The 2 Year Rule by JsByrne

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Deeds Variation - The 2 Year Rule
by JsByrne

Deeds of Variation - The 2 Year Rule

Introduction

I recently received a query from a practicing solicitor asking for advice on using Deeds of Variation. The solicitor in question was acting on behalf of clients who wished to alter the terms of their father's Will to afford a fairer disposition of the assets amongst family members. Ordinarily this would one of the situations where a Deed of Variation could be employed. However, the testator's death was 6 years ago.

The query was despite the lapse in time, could a Deed of Variation still be used without asking for it to be applied retrospectively for the purposes of inheritance tax and capital gains tax?

The Purpose of the 2 Year Rule

To recap from my previous article, in order to be valid a Deed of Variation must comply with 3 conditions;

Must be made in writing.
All persons who were original beneficiaries in the Will and any persons who benefit from the proposed variations in the Deed must sign the Deed.
It cannot be given for money or money's worth.
It must be made within 2 years of the death of the decedent.

One of the most crucial uses for a Deed of Variation is to affect the tax liability on an estate. Therefore, for a Deed to be valid it must be made within 2 years of the death of the testator in order to be applied retrospectively for Capital Gains Tax and Inheritance Tax. If a Deed of Variation fails to comply with this - or any of the other conditions - it ceases to have retrospective affect for tax purposes, and amounts to nothing more than a transfer of value - namely, a gift.

Having liased with the Inland Revenue on this subject, it is clear that Deeds of Variation are only to be used within the 2 year period as, to quote an Inland Revenue adviser

Author's Biography:

Miss JsByrne holds a Bachelor of Law degree with Honours & a post-graduate diploma in Legal Practice. Also gained qualification in Wills Writing & is the owner/author of www.Draft-Your-Will.com and DYW Wills & Estate Planning Newsletter - http://www.Draft-Your-Will.com/Legal_Updates.html

Posted on: June 11,2005

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