January 2008

Don't dismiss deeds of variation

That’s what local accountants Auker Rhodes are warning.  Deeds of variation may seem obsolete to some, now that the government have allowed inheritance tax nil rate bands (NRB) to be transferred between spouses upon the death of the first.  However Auker Rhodes believe that there are still some cases when a deed of variation is worth thinking about.

A deed of variation allows the beneficiary of a will to re-write the will, so the estate goes to someone else, often the person for whom the money will be treated in the most tax efficient way.

Grant Rudloff from Auker Rhodes explains: “At the moment, because of new legislation surrounding inheritance tax, the nil rate band, after the transfer of a deceased spouse’s estate, can be up to £600,000.  After this point, an individual may want to think about deeds of variation, ensuring that any funds over the combined nil rate band go to the person who is liable to the least taxation.

“Discretionary trusts can be made, that allow the surviving spouse to ensure the estate goes to the most tax efficient beneficiary on his or her death, while still allowing for the standard of living that he or she is used to.

“There is also provision for wills to skip generations for tax purposes.  It is important to think about these clauses, as deeds of variation are still an effective way of making sure the taxman doesn’t receive a larger portion of your estate than is necessary.”

For more information contact Grant Rudloff on 01274 548000

SOURCE: www.martineau-johnson.co.uk/  - and Mills and Reeve Private Affairs winter 2007 issue

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