The Budget 2015 – What does the future hold for Deeds of Variation?

A week has passed since the latest budget announcements and the last before a national election. Now the dust has settled and we can assess the impact over our 1p cheaper pint of beer. In amongst the headline grabbing pension lifetime allowance changes and ISA freedoms, was a hint of a review looming into Inheritance Tax with a specific mention given to Deeds of Variation.

A Deed of Variation may be used by beneficiaries to change the entitlements under a will or intestacy, often for tax saving purposes. It can also enable provision to be made for someone who has not been included adequately, or indeed at all, in a will. It may also be used to remove any uncertainty within a will or amend a defect.

If Deeds of Variation are revised or even removed from use, it could have far-reaching consequences for dependents of a deceased individual. So, how can you guide your clients to plan ahead and present an alternative option to them?

Including an IHT 2 year Discretionary trust in a Will allows the executor’s time to decide upon the distribution of the estate, with the ability to distribute in the most tax efficient manner. It is a means of limiting the potential IHT liability on a couples joint assets including those couples who are not married/mixed domicile.

An additional key benefit of placing this trust into clients Wills is a full audit trail is automatically produced to claim the 1st spouses nil rate band allowance on 2nd death. A large measure of control and flexibility can be given to the surviving spouse by appointing the spouse as an Executor & Trustee so that no appointment can be made without the spouse’s agreement.

And finally, there is no need for a Deed of Variation which could delay administration of an Estate and incur additional unknown costs later on. If of course they continue to be an available option in the future.

What is unknown is how much of last week’s announcements were political rhetoric in light of Ed Milliband’s use of Deeds of Variation to pass on a family property after his father’s death.

What is known is that rather than second guessing what might happen in the future, encourage your clients to plan ahead and protect the interests of their loved ones after they’ve gone with an IHT 2 year Discretionary Trust.

Want to know more? Contact us enquiries@btwc.co.uk for a full Client Guide to the IHT 2 Year Discretionary Trust.