For decades, rumours have circulated regarding the abolition of deeds of variation. Following last March’s budget there were fears that the Chancellor might, as part of his review of Inheritance Tax (IHT), introduce tighter controls on the use of deeds of variation.
Thankfully, these initial fears have proved unfounded – for the time being at least – because, having considered the responses to the consultation, the Chancellor has now announced that the Government will not be introducing any new restrictions on how deeds of variation can be used for tax purposes. However, the Chancellor has left his options open, stating that he intends to keep the position under review.
“For example, many are deployed to alter the distribution of an estate on intestacy to ensure that the estate is shared according to the needs and wishes of the deceased’s family, which are not always met by the strict terms of an intestate distribution.
“In addition, since the introduction of the reduced rate of IHT at 36%, where a sufficient part of an estate passes to charity, many clients opt to alter a Will or intestate distribution to divert funds to charity and, as a result, to secure the 36% rate.
“It is important to remember that deeds of variation do not exploit a ‘loophole’; instead they are specifically provided for in IHT and Capital Gains Tax legislation and are a legitimate method of people saving tax, both for themselves and for the sake of their loved ones. For more information, about planning for the future, please contact us.”