A reader writes:
My mother has been left a legacy in the Will of an old school friend. Since she is already well provided for, she would like this inheritance to be diverted to me. I believe that you can do this by making a special declaration.
We think this is a good idea, not just because I could have the money now rather than waiting to inherit it from my mother, but because it could also save on inheritance tax on my mother’s estate by bypassing her altogether.
How do we make this declaration – and are there any implications that we may not have considered?
Annie Shaw replies:
Your mother needs to draw up a ‘deed of variation’ in your favour. This ‘rewrites’ the part of the Will that benefits a certain person (in this case your mother) and passes the bequest to someone else (you). It must be made no more than two years after the deceased’s death.
There are many reasons to use a deed of variation; saving inheritance tax is one. Another could be to include someone who has been omitted from the Will. For example, bequests may have been left to two children, omitting a third child born after the Will was executed.
You can draw up a deed of variation yourself – you can find templates on the internet. However, this is not advisable as there may be legal and tax implications of which you are not aware. You should take professional legal advice; if you don’t have a solicitor, Saga Legal Services could help.
What happens if you die without leaving a will?
Deed of variation
If there are other beneficiaries of your mother’s friend’s Will who could be disadvantaged by the deed of variation, you would need to notify the executors and obtain the other beneficiaries’ consent.
One of the principal ways that other beneficiaries could be affected is the amount of tax due on the deceased’s estate, potentially reducing the size of their legacy. Problems could arise if beneficiaries refused to give consent, or were legally unable to consent – for instance, if they were minors.
The executors would also have to notify HMRC about the variation if the amount of tax due altered.
Tax and benefits
The other thing to be aware of is your mother’s entitlement to benefits and liability for contributions to care home fees. If she was ever assessed for either, the existence of the deed could be evidence of ‘deliberate deprivation of assets’, meaning the variation could be ignored and your mother assessed as if she had actually received the money.
If a potential beneficiary is aware that a legacy is coming their way that they would prefer to be given to someone else, it is a good idea, where possible, to ask the person leaving the legacy to redraft their Will.