Deed of Family Arrangement
A Deed of Family Arrangement (or Deed of Variation as they are also known) is a document which rewrites a person’s Will after they have died. The point is that sometimes it is just not sensible for those stated in the Will to benefit. And they may neither wish nor need to benefit. In these circumstances a deed of family arrangement can pass the benefits on to others. For example, the children of the original beneficiary might be in greater need.
Why a Deed of Family Arrangement?
The reason for preparing a Deed of Family Arrangement is generally either to save inheritance tax or capital gains tax, or for family reasons. Perhaps a deceased person may have given their entire estate to their spouse under a Will but the surviving spouse wishes to leave a sum of money directly to the children who are in greater immediate need.
Rather than the spouse giving the money to the children which would be classed as a gift for tax purposes, the Deed of Family Arrangement would “rewrite” the Will. So that, effective for tax purposes, the sum of money was a legacy given by the deceased to the children under their Will and not by the surviving spouse.
Or maybe the Last Will has not been updated for years and leaves out a family member who needs to be dealt with fairly.
A Deed of Family Arrangement is a very useful instrument and can be created no later than 2 years after the date of death. However, all the affected beneficiaries under the Will must be in agreement to the change being made. The deadline for tax purposes is absolute. A deed of family arrangement must be sorted out at the earliest possible opportunity, or the chance may be missed.
The Deed of Family Arrangement can also be used in where a deceased person did not leave a Will, i.e. an Intestacy. The deed could re-route monies from family members who are entitled to inherit under the intestacy rules to another relative, charity or friend. Too many inheritances go to people who don’t need them as people fail to review their legal planning on a regular basis. Better to help those who can make better use of the inheritance, perhaps.
Click the link here if you think a deed of family arrangement may be of benefit to your family.