In short the answer is no, you cannot rewrite someone’s Will after they have died. Whilst you cannot change a Will following someone’s death, you might be able to vary the tax treatment of a gift and subsequently your entitlement from a Will after someone has died. Read on to find out in what circumstances this can be achieved.
Who can vary their entitlement to a Will following a death?
Many people who inherit from an estate would like to make gifts from that inheritance to their friends, family and charity. Usually (in the case of friends and family) you must survive those gifts by 7 years in order for them to escape your own estate for Inheritance Tax (IHT) purposes. If you receive a capital asset from an estate, gifting that onwards might also invoke Capital Gains Tax (CGT) implications for you. However, it is possible to invoke provisions in both the Inheritance Tax Act 1984 and Taxation of Chargeable Gains Act 1992 in order to ensure that any such onward gifts do not have adverse IHT and CGT implications.
In order to ‘vary’ your interest in an estate in this tax efficient manner, you must firstly be a beneficiary of that estate. You can only vary an inheritance you were personally due to receive (or have already received). Therefore, any beneficiaries who would be negatively impacted by the variation must agree to the amendments. In order to obtain the benefit, variations to your entitlement must be completed within 2 years of the date of death. It can occur either before or after obtaining a Grant of Probate and before or after you have actually received the inherited assets.
We will refer to the variation of a Will or variation of your inheritance in the rest of this blog. This is the typical way that Deeds of Variation are spoken about. However, your interest under a Will would always remain the same. What a Deed of Variation accomplishes is a legally binding onward gift of that inheritance in a tax efficient manner (sometimes made by the executors of the estate directly if they are yet to administer the estate).
How to vary a Will after death
There are two main ways to vary your entitlement under a Will following the death of a loved one:
Deed of Disclaimer:
This document is drawn up when a beneficiary does not wish to accept what has been left to them in the Will but does not specify an alternative recipient. In this occasion, the disclaimer does not achieve an onwards gift. It simply ends your right to receive to receive anything from the estate.
The gift is added to the deceased person's 'residuary estate,' which includes the remaining assets after gifts and debts have been settled. The residuary estate is then distributed according to the deceased person’s Will (or intestacy). If the person completing the deed of disclaimer was named as the residuary beneficiary of the Will, then the estate will be distributed as though this person had predeceased the testator. Most Wills include provisions which state what should happen to the estate in those circumstances; if there is no such alternative included within the Will then the residuary estate will pass in accordance with the intestacy rules. If you are considering a deed of disclaimer in these circumstances, you should take advice on how the intestacy rules will apply.
Deed of Variation:
This is drawn up when one or more people who are inheriting the from the Will want to vary their entitlement in order to make an onward gift. The reasons why a deed of variation can be advantageous include:
Enables you to add additional beneficiaries: For example, if a child is born after a Will was made, a deed of variation can ensure they are not unfairly left out if it.
Clarity: if there are any ambiguities in the Will, for example in the wording, a deed of variation presents an opportunity to clear up any misunderstandings.
Change of circumstances: it may be reasonable to vary a gift in a Will if the beneficiaries needs have evolved. For example, if one beneficiary is already wealthy in comparison to another, they may collectively decide against an equal split.
Deed of Variation – Inheritance Tax benefits
Should a beneficiary wish to reduce their Inheritance Tax liability, a deed of variation can aid this in the following ways:
If a beneficiary wanted to gift some of their inheritance to their own children for example, they can redirect some of the funds to them. For inheritance tax purposes this is treated as a redirection from the deceased person and so bypasses the 'seven-year rule' that applies to traditional gifts. This rule often pertains to gifts made by the deceased individual within seven years of their passing, where the value of the gift is included in the estate for Inheritance Tax calculation purposes.
They can redirect part of the estate to an exempt beneficiary, such as a spouse or charity, which could reduce the estate’s overall inheritance tax liability or preserve allowances between spouses.
They could reduce the amount of Inheritance Tax the estate owes by gifting a portion of the estate to charity.
Variations to Wills that are not allowed
There are restrictions on how beneficiaries can vary gifts left to them. For instance, they cannot:
Vary the inheritance of anyone who’s mentioned in the Will unless they agree.
Change executors or guardians named in the Will.
Increase their own share of the estate unless it’s being given to them by someone else in the Will and they agree.
Vary a minor's share without proper consent or court approval.
Vary the same asset twice.
What if there is no Will?
If someone passes away without a Will, their estate will be distributed according to the rules of intestacy. We have previously covered Intestacy here. It is entirely possible to vary your share of an intestate estate in the same ways as set out above.
If you would like more information about varying the tax treatment of a gift in a Will following a death, please contact any member of our Wealth Management and Taxation team on 01494 521301.