Deed of variation after two years

[honkytonkheroe]

Could someone who knows about probate advise what the affect of not agreeing a deed of variation is, within the two year period.

Would love to give you many more details, just to talk to someone about it, but feel it’s far to outting.

We are coming up to the two year period and nothing has been agreed. I am contesting nothing and just want what is due under the Wills. Would definitely be happy to compromise slightly but just tried mediation and the other party withdrew. If the other party contest it, what happens if they let the 2 year period go?

I am assuming you are in England.

If a deed of variation is executed within two years, it is treated for IHT and CGT purposes as if the will had always distributed the estate that way. Once the two years has expired there is no longer any point in a deed of variation. It is, of course, still open to the beneficiaries to give some or all of their inheritance to others as a gift.

The other party cannot contest your refusal to enter into a deed of variation. It is entirely voluntary. A deed of variation only needs to be agreed by those beneficiaries who will lose some of their inheritance. It is therefore open to other beneficiaries (if there are any) to execute a deed of variation provided your inheritance is unaffected.

If the other party is someone who thinks they should have inherited (or should have inherited more than they actually did), it is now too late for them to make an Inheritance Act claim. They may still be able to contest the will on other grounds.

So, I am a daughter of the deceased and the contesting person is the 2nd wife of the deceased. She wants to claim under the inheritance act despite getting 70% of all the combined estate under the divorce fiction and more than 50% of the actual estate (having taken out anything jointly owned). So, are you saying that she only has up to the 2 year period under the inheritance act claim? Is this because if she won, then it would be too late for a deed of variation? What I’m especially confused about (and probably not explaining it very well) is, if after the 2 year period she loses all tax benefits (the estate includes double NRB and BPR) or just anything extra gained as a result of the deed of variation. If a deed of variation was made after the 2 year period, do you lose both NRB and BPR? This has all been a really steep learning curve for us and I know things about probate now I never wanted to know but I am still a little confused by this despite endless googling!

Inheritance Act claims are completely separate from deeds of variation. Any Inheritance Act claim must be made within 6 months of probate being granted. If she wants to make a claim now, she will first need to get permission from the court to claim out of time. She may be able to get permission if, for example, negotiations started within the 6-month limit and have been continuing since then.

Regarding tax, if a deed of variation is executed within 2 year the estate is taxed as if the deed had been the original will. After the 2 year limit the deed is irrelevant for tax purposes so the estate is taxed based on the original will. Also, anything given to her after the 2 year limit is counted as a gift from the beneficiary who gives it to her, so would potentially be subject to IHT if the giver dies within 7 years.

There is no grant of probate as she is executor so has just held it up for nearly 2 years. The two years is not yet up but is weeks away. So if there is no tax to pay under the Wills, due to double NRB, then she isn’t particularly under pressure from the time limit? She could apply out of time and just take the tax situation under the Will (£0) because any variation would be in her favour and as the spouse she wouldn’t pay IHT for anything willed to her?

I think you are still a little confused.

She could make an Inheritance Act claim. If she hasn't obtained probate yet the clock hasn't started running. The claim would not, therefore, be out of time. She can make a claim whenever she wants. However, she would have to stand down as executor to do so.

She has, from the sounds of it, been trying to get you to sign a deed of variation. That is not something you apply for. All that is needed is for you to sign. After the two-year deadline there is no longer any point in a deed of variation. Any redistribution of the estate would be viewed for tax purposes as a gift from you to her and would be classed as a potentially exempt transfer, so there would be no tax to pay unless you die within 7 years. There would be no need for any paperwork. You would simply give her the money involved (if you agreed). She cannot force you to sign a deed of variation nor can she take legal action against you based on your refusal to sign.

She would not pay IHT under any circumstances. IHT is paid by the estate before it is distributed. IHT must be paid within 6 months of death, so should have been dealt with months ago.

As probate hasn't been obtained you need to see a solicitor and apply for a citation. This will either prompt her into action or allow the next entitled person (possibly you) to replace her as executor.

It is very confusing and it isn't helped by me not being able to give many details!

So there is no time limit on the inheritance act claim other than it having to be within 6 months of grant of probate. We do have a solicitor but with it being weekend, I suddenly have lots of questions and no one to ask! I'm just trying to work it out.

The main thing I'm trying to work out is why our solicitor feels that they would be concerned by the time limit for the deed of variation coming to an end. I'm pretty sure they have no case and need us to agree to giving her something more just to get rid of her. Legal bills are so expensive and whilst I'm sure we'd win, I also don't want the stress or expense of it. If the 2 year time limit is just a tax thing and it just means that tax would have to be paid under the Will and not the variation, why would that matter to her.

I do understand IHT gets paid out of the estate. I said her, because it will come out the bank account which she will inherit so has the same affect.