Budget proposal threatens use of deeds of variation to avoid inheritance tax
After George Osborne delivered his Budget yesterday, our expert wills, probate and trusts lawyer Simon Cook considers the impact of one of the proposals.
“I can also tell the House that we will conduct a review on the avoidance of inheritance tax through the use of deeds of variation. It will report by the autumn,” said George Osborne in his Budget statement yesterday.
At the moment deeds of variation can be used to vary entitlements under a will. If executed within two years of the date of death the inheritance tax and capital gains tax consequences can be written back to the person who has died, rather than the person making the variation. This can have advantageous tax results and has been used on numerous occasions – including by Ed and David Miliband following the death of their father in 1994.
If deeds of variation are abolished then it removes the ability of the family to rearrange affairs in a tax efficient manner after the death has occurred. It therefore emphasises the need to take professional advice about putting your affairs in order and having a correctly drafted will in place. There will be no more second bites at the cherry.
The moral is – make sure you have a will and it is drafted correctly.
Simon Cook is a partner in our wills, probate & trusts department. He handles all aspects of private client work such as trusts (including personal injury trusts), wills, powers of attorney, Court of Protection and estate planning and administration.We're here to help