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Where there’s a Will – there’s a way to change it

The use of a deed of variation (sometimes called a deed of family arrangement) is a long established practice which enables the terms of a Will to be altered by the beneficiaries after the death of the testator. If the appropriate election is made then currently the inheritance tax treatment of the will takes the variation into account. This means a variation can be used, for among other reasons, to restructure bequests to maximise the tax efficiency of a Will.  It has long been suspected that the generous nature of this election might be reconsidered and we are now told that a consultation will be launched later this year to do just that. It's early days yet but the clear message has to be to ensure that your Will is drafted efficiently and reviewed regularly to make sure it is still in order as the ability to change things after death may not exist for much longer.

On a similar theme, the autumn statement in 2014 set up measures to prevent the use of so-called pilot trusts. The idea of pilot trusts was that by using a number of trusts, each set up with a nominal sum, each trust could have its own nil rate band and this could significantly reduce the IHT payable over the lifetime of the trusts. After consultation it was decided that such tax savings could be prevented if all the property added to trusts created by the same person after 10 December 2014 was taken in to account in computing the IHT payable for charges arising after 6 April 2015.

However, recognising that many such arrangements were set up in Wills where there may not be time to reorganise matters in the event of an unexpected death, the new rule would not apply where there were additions to trusts created under a Will written before 10 December 2014 if the death occurred before 6 April 2016.  This grace period has now been extended to where the death occurs before 6 April 2017.

There is a second relaxation of the rules which means that additions of less than £5,000 may be ignored. This is to stop there being significant tax consequences arising where there may be a small technical addition to a trust such as an individual paying the professional fees for a trust.



Date: 19th March, 2015
Author: Lisa Spearman


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