Deed of Variation

This case study shows how a Deed of Variation can be used to amend the terms of a Will.

In this case, the donor was a deceased widower from the South West of England with no children whose estate consisted of four properties and a large investment portfolio, together exceeding £5 million.

In a homemade Will, the donor had made a number of specific and pecuniary legacies, to both exempt and non-exempt beneficiaries with the residue to be held on two successive life interest trusts with an educational institution as the remainderman.

The executors and their solicitor highlighted the difficulties in respect of the Will drafting and consulted with the life tenants and the educational institution. A Deed of Variation was drawn up and executed within two years of the deceased’s death so as to capitalise the life tenants’ interests and advance the residue to the educational institution.

This resulted in the legacy being received sooner (within 2 years of death rather than potentially in 20 years, when the value may have also been negatively impacted). The solicitor was proactive in suggesting this solution which benefited all beneficiaries.

The testator was a longstanding lifetime supporter of the educational institution. He had previously taught at the institution and he donated during his lifetime. The beneficiaries agreed to vary the deceased’s Will effectively terminating the life tenants’ trusts and advancing capital sums to the three beneficiaries. The life tenants and the educational institution shared the balance of the net estate (after tax and payment of specific and pecuniary legacies) in the region of £1.5-2 million.

This case study highlighted that, particularly with high value estates, it’s important to ensure that Wills are professionally prepared. Also, it highlights the use of deeds of variation to minimise inheritance tax and optimise the legacies of the testator’s beneficiaries.

Where the deceased is leaving a significant legacy or interest to a charity, it would be prudent to engage with the charity prior to death to manage expectations and generally ensure the efficiency of the legacy.