Who should pay for a deed of variation?

[hiriskpaul]

I am an executor of an estate which is now hopefully coming close to being wound up and one of the beneficiaries is starting to make noises about having his share of the residuary estate passed straight to his kids. Fine by me and I cannot see why other beneficiaries would object and it would not change IHT, so I assume I would not need to inform HMRC. But if I have to pay a solicitor to draw up a deed of variation, is it reasonable to ask the beneficiary wanting the change to pay? Or is it normal practice for all solicitor costs to come out of the estate?

Would I even need a deed of variation for something like this? These notes indicate a DIY approach might be possible https://assets.publishing.service.gov.u ... 5/IOV2.pdf

What risk would I be taking on going down the DIY route rather than getting a solicitor to draw up a formal deed?

[Dod101]

I am an executor of an estate which is now hopefully coming close to being wound up and one of the beneficiaries is starting to make noises about having his share of the residuary estate passed straight to his kids. Fine by me and I cannot see why other beneficiaries would object and it would not change IHT, so I assume I would not need to inform HMRC. But if I have to pay a solicitor to draw up a deed of variation, is it reasonable to ask the beneficiary wanting the change to pay? Or is it normal practice for all solicitor costs to come out of the estate?

Would I even need a deed of variation for something like this? These notes indicate a DIY approach might be possible https://assets.publishing.service.gov.u ... 5/IOV2.pdf

What risk would I be taking on going down the DIY route rather than getting a solicitor to draw up a formal deed?

What is the beneficiary's motivation? If there is no underlying problem why does he not just accept the legacy and pass it on? Presumably because he does not want it to hit his estate first for IHT or to let his creditors get their hands on it or something in which case, I would say I have no objection but you will need to pay the fees for a Deed of Variation. Otherwise I assume that the residual beneficiary will be in effect meeting the cost.

I have no idea if you would have any liability if you simply passed the sum on to his children but if he owes a large debt and this is his way of avoiding it, I would think that there could be some comeback against you.

Only my random thoughts. I did something similar a few year's back with mother in law's estate with one beneficiary but I knew his circumstances well enough not to be concerned about any ulterior motive.

Dod

[scrumpyjack]

I am an executor of an estate which is now hopefully coming close to being wound up and one of the beneficiaries is starting to make noises about having his share of the residuary estate passed straight to his kids. Fine by me and I cannot see why other beneficiaries would object and it would not change IHT, so I assume I would not need to inform HMRC. But if I have to pay a solicitor to draw up a deed of variation, is it reasonable to ask the beneficiary wanting the change to pay? Or is it normal practice for all solicitor costs to come out of the estate?

Would I even need a deed of variation for something like this? These notes indicate a DIY approach might be possible https://assets.publishing.service.gov.u ... 5/IOV2.pdf

What risk would I be taking on going down the DIY route rather than getting a solicitor to draw up a formal deed?

A DOV is the beneficiary varying his/her share of the estate so it is up to the beneficiary to have it prepared and to pay for it, not you as executor.
The beneficiary can then give you a copy and ask that his/her share of the estate is distributed by you in accordance with the DOV.
Any side issues of the beneficiary seeking to do this for nefarious reasons are up to him/her and are not your concern. If the DOV does not affect IHT, I don't think a copy needs to be given to HMRC, but it is probably a good idea for you to send them a copy anyway.

[hiriskpaul]

I am an executor of an estate which is now hopefully coming close to being wound up and one of the beneficiaries is starting to make noises about having his share of the residuary estate passed straight to his kids. Fine by me and I cannot see why other beneficiaries would object and it would not change IHT, so I assume I would not need to inform HMRC. But if I have to pay a solicitor to draw up a deed of variation, is it reasonable to ask the beneficiary wanting the change to pay? Or is it normal practice for all solicitor costs to come out of the estate?

Would I even need a deed of variation for something like this? These notes indicate a DIY approach might be possible https://assets.publishing.service.gov.u ... 5/IOV2.pdf

What risk would I be taking on going down the DIY route rather than getting a solicitor to draw up a formal deed?

What is the beneficiary's motivation? If there is no underlying problem why does he not just accept the legacy and pass it on? Presumably because he does not want it to hit his estate first for IHT or to let his creditors get their hands on it or something in which case, I would say I have no objection but you will need to pay the fees for a Deed of Variation. Otherwise I assume that the residual beneficiary will be in effect meeting the cost.

I have no idea if you would have any liability if you simply passed the sum on to his children but if he owes a large debt and this is his way of avoiding it, I would think that there could be some comeback against you.

Only my random thoughts. I did something similar a few year's back with mother in law's estate with one beneficiary but I knew his circumstances well enough not to be concerned about any ulterior motive.

Dod

He says the motivation is inheritance tax, but I have a feeling as well that it is because he does not want his wife to get her hands on the money!

I would definitely not simply pass the money to his children. I would do a DIY DoV.

[scrumpyjack]

ps Recently I did draw up a Letter of Variation myself (it does not need to be a deed) in accordance with the HMRC checklist of what needs to be included. It was very simple, the main point is to be sure you get the wording right about tax etc if it involves shares or non cash assets.

I have a solicitor friend look at it and he said it was fine.

[hiriskpaul]

I am an executor of an estate which is now hopefully coming close to being wound up and one of the beneficiaries is starting to make noises about having his share of the residuary estate passed straight to his kids. Fine by me and I cannot see why other beneficiaries would object and it would not change IHT, so I assume I would not need to inform HMRC. But if I have to pay a solicitor to draw up a deed of variation, is it reasonable to ask the beneficiary wanting the change to pay? Or is it normal practice for all solicitor costs to come out of the estate?

Would I even need a deed of variation for something like this? These notes indicate a DIY approach might be possible https://assets.publishing.service.gov.u ... 5/IOV2.pdf

What risk would I be taking on going down the DIY route rather than getting a solicitor to draw up a formal deed?

A DOV is the beneficiary varying his/her share of the estate so it is up to the beneficiary to have it prepared and to pay for it, not you as executor.
The beneficiary can then give you a copy and ask that his/her share of the estate is distributed by you in accordance with the DOV.
Any side issues of the beneficiary seeking to do this for nefarious reasons are up to him/her and are not your concern. If the DOV does not affect IHT, I don't think a copy needs to be given to HMRC, but it is probably a good idea for you to send them a copy anyway.

Thanks, that's useful to know. Suppose he produces a DIY DoV instead of one produced by a solicitor. Should I accept it? If so, what risks would I be taking. It is just cash that is due to be handed over, although some of that cash comes from property income, so I would need to produce appropriate documentation for their tax returns. Kids are all over 18, so no issue with money going to minors.

[scrumpyjack]

Whether you accept it or not, I can't comment on. I'll leave that to a solicitor, but it is so simple I suggest you tell him to get a solicitor to do it. I can't imagine it would cost very much. It is only a few standard sentences.

As regards tax, I think you just do the R185 (Estate) form
https://www.gov.uk/government/publicati ... ate-income

so the beneficiaries can include their share of estate taxed income in their returns. Obviously this would be the varied beneficiaries per the DOV

[Dod101]

A DOV is the beneficiary varying his/her share of the estate so it is up to the beneficiary to have it prepared and to pay for it, not you as executor.
The beneficiary can then give you a copy and ask that his/her share of the estate is distributed by you in accordance with the DOV.
Any side issues of the beneficiary seeking to do this for nefarious reasons are up to him/her and are not your concern. If the DOV does not affect IHT, I don't think a copy needs to be given to HMRC, but it is probably a good idea for you to send them a copy anyway.

But I cannot see a beneficiary being able to draw up a Deed of Variation (of the Will) because he has no authority to do that. His deed will be in the form of an instruction to the Executor to divert his legacy to another person. Then as you say, it is of no concern to the Executor what the motive is, and it keeps it simple for the Executor as well.

Does that not cover it?

Dod

[Clitheroekid]

As executor of the estate your duty is to the estate generally, not to any individual beneficiary. The proposed DoV is of no benefit to anyone other than the beneficiary, and he should therefore bear any costs incurred in its preparation.

Bearing in mind that you can be held personally liable for any errors made as executor it would be foolish to attempt the preparation or analysis of a legal document when you (1) derive no personal benefit from it; and (2) aren't qualified to do so.

You should therefore tell the beneficiary that if he wants a DoV he must either provide you with a draft DoV, which you will then pass to a solicitor for approval, or that you will instruct a solicitor to prepare a DoV in accordance with his wishes. Either way, it should be made clear to him that he will be responsible for paying the solicitor's bill.

[scrumpyjack]

These comments from Irwin Mitchell say that the DOV is the beneficiary amending his/her share of the estate, so it is the beneficiary's responsibility to ensure it is correct and to pay for it. But I agree a prudent executor should also ensure that the DOV is valid and so require it be prepared by a solicitor.

https://www.irwinmitchell.com/personal/ ... 0correctly.

[hiriskpaul]

Thanks for all the comments. Having the beneficiary pay for a DoV coincides with my instinctive view on this and unless the DoV is very trivial I don't really see why I should take the risk of there being legal mistakes in it. I have not asked the solicitor I have used for other work yet, but I suspect this kind of DoV must be simple, common and probably only cost about £100 anyway.

[hiriskpaul]

As far as I can ascertain, there is little reason for me to be involved with this at all. As IHT is not affected, I am finding it hard to see what the risks to me as an executor are here. I don't think I even need to sign the DoV. He just needs to give me a copy of the letter/DIY DoV which he has signed and dated and I distribute the cash according to his instructions, with R185 (Estate) forms covering the income part. Dangerous to say this I know, but what could go wrong? I don't want to be overly bureaucratic and insist and a DoV drawn up by a solicitor if there is negligible risk.

[swill453]

I've put together a Deed of Variation for my Dad to vary an inheritance he's getting. I followed the HMRC checklist, and all that needs to happen is he signs it and keeps it. Then he passes on the cash, of course. This way the executor doesn't even need to know it's been done (as it doesn't affect IHT for the deceased).

Deed of Variation

This deed varies the will of [NAME] of [ADDRESS] who died on [DATE].

The inheritance of £XXX left to me shall instead go in equal shares to AA and BB. [fully identified of course]

I intend that the provisions of section 142(1) of the Inheritance Tax Act 1984 shall apply to this variation.

Signed Date


[NAME]
[ADDRESS]

If only one beneficiary is affected it doesn't need to be complicated.

Scott.

[hiriskpaul]

I've put together a Deed of Variation for my Dad to vary an inheritance he's getting. I followed the HMRC checklist, and all that needs to happen is he signs it and keeps it. Then he passes on the cash, of course. This way the executor doesn't even need to know it's been done (as it doesn't affect IHT for the deceased).

Deed of Variation

This deed varies the will of [NAME] of [ADDRESS] who died on [DATE].

The inheritance of £XXX left to me shall instead go in equal shares to AA and BB. [fully identified of course]

I intend that the provisions of section 142(1) of the Inheritance Tax Act 1984 shall apply to this variation.

Signed Date


[NAME]
[ADDRESS]

If only one beneficiary is affected it doesn't need to be complicated.

Scott.

Thanks, looks very simple. A potential issue I can see is that some of the £XXX may include estate income, which must be declared as income by the beneficiaries. That would likely mean every beneficiary should be issued with an R185 (Estate) form by the executor, so the executor would have to be involved. In my case, £XXX contains a few thousand of property income on which tax has been paid (or will be).

[swill453]

Thanks, looks very simple. A potential issue I can see is that some of the £XXX may include estate income, which must be declared as income by the beneficiaries. That would likely mean every beneficiary should be issued with an R185 (Estate) form by the executor, so the executor would have to be involved. In my case, £XXX contains a few thousand of property income on which tax has been paid (or will be).

If you say so. In my case Dad is simply getting a cash inheritance from the estate.

Scott.

[hiriskpaul]

Thanks, looks very simple. A potential issue I can see is that some of the £XXX may include estate income, which must be declared as income by the beneficiaries. That would likely mean every beneficiary should be issued with an R185 (Estate) form by the executor, so the executor would have to be involved. In my case, £XXX contains a few thousand of property income on which tax has been paid (or will be).

If you say so. In my case Dad is simply getting a cash inheritance from the estate.

Scott.

If there is no estate income included and he has not received an R185 (Estate) form from the executors, then from what I have read, I cannot see why this would not work and as you say, no need for the executors to be involved. Unless I have missed something, it seems to me the important thing here is that the DoV is available to the executors of your father's estate when he dies, as evidence that he did not receive the cash and subsequently give it away.

[PinkDalek]

I've put together a Deed of Variation for my Dad to vary an inheritance he's getting. I followed the HMRC checklist, and all that needs to happen is he signs it and keeps it. Then he passes on the cash, of course. ...

I may be wrong but am surprised the cash should ever reach your Dad. Should it not be remitted by the Executor(s) under the terms of the DoV?

Another random point for hiriskpaul, our solicitors advised that we should look at the Individual Insolvency Register before any payments were made to the residuary beneficiaries etc. He was, perhaps, overly cautious but it might be of interest to see what Clitheroekid says on the subject.

[PinkDalek]

[What is the beneficiary's motivation? If there is no underlying problem why does he not just accept the legacy and pass it on? Presumably because he does not want it to hit his estate first for IHT or to let his creditors get their hands on it or something ...
I have no idea if you would have any liability if you simply passed the sum on to his children but if he owes a large debt and this is his way of avoiding it, I would think that there could be some comeback against you. ...

DoVs are ineffective for people attempting to wriggle out of third parties debts. There was plenty written on this subject back in the days of TMF. Sadly those posts are most likely impossible to find, even if saved in the WayBackMachine.

Therefore a random blog might assist:

https://www.vwv.co.uk/news-and-events/blog/private-client-law-brief/deeds-of-variation

the variation takes place retrospectively for inheritance tax and capital gains tax purposes. only, as far as I am aware.

[Lootman]

[What is the beneficiary's motivation? If there is no underlying problem why does he not just accept the legacy and pass it on? Presumably because he does not want it to hit his estate first for IHT or to let his creditors get their hands on it or something ...
I have no idea if you would have any liability if you simply passed the sum on to his children but if he owes a large debt and this is his way of avoiding it, I would think that there could be some comeback against you. ...

DoVs are ineffective for people attempting to wriggle out of third parties debts. There was plenty written on this subject back in the days of TMF.

I recall one such discussion at TMF and that a view was expressed that there is a problem diverting a bequest away from someone undergoing personal bankruptcy.

However if all that person has is "debts" then there is no problem. Likewise if the bankruptcy has been discharged, again there is no problem.

It is only during the bankruptcy/insolvency process itself that one has to be careful.

Of course, I might misremember as it was a good number of years ago.

[Dod101]

Thanks to both. I can see the logic in what is being said although there does not seem to be anything specific on the subject in the link which PD has provided. It is somewhat similar to the thread I instigated recently about trying to avoid an inheritance being used for home care fees.

Dod