Variation of Inheritance
‘Optimise’ your Inheritance for the benefit of you and your family.
Options for Varying your Inheritance
When a person dies, it is often automatically assumed that the beneficiaries can only receive the estate by receiving the inheritance as a ‘gift’.
People making Wills (Testators) and persons benefiting from them (Beneficiaries) may not realise that there could be a ‘better’ way for the beneficiary to receive inheritance other than by the traditional outright ‘gift’.
As a result, there often is little planning within the Will itself or little regard taken as to protecting the inheritance for the chosen beneficiary.
Likewise, people may not realise that within 2 years of the date of death, a beneficiary can ‘vary’ an inheritance to either benefit other person(s) directly or alternatively to establish a trust.
What sort of issues arise from inheriting as an outright gift?
- assets received as gifts are usually then subject to Inheritance Tax laws on the death of the beneficiary;
- assets received as gifts can be lost in a Bankruptcy/Insolvency of the beneficiary;
- assets received as gifts can then be ‘attacked’ on Divorce;
- assets received as gifts become the assets of the beneficiary and can be thus more susceptible to erosion by future Care fees;
- as such the ‘inheritance’ can be diluted and eroded such that future generations such as grandchildren do not ultimately inherit the full value.
How can the inheritance be received but be protected?
If each beneficiary executes a ‘Variation’ to their inheritance received, the respective shares they inherit can be varied in such a way so as to do the following, namely
- to still provide full use of the money/assets for them;
and to
- prevent and protect the ‘net estate’ of the beneficiary from increasing, so potentially protecting the inheritance from attack.
Note: The Variation itself is not in itself sufficient to achieve this. It is the use of a Discretionary Trust structure within the Deed that achieves the goals above.
The Variation re-writes the terms of the Will so that the share of the beneficiary that would have been received as a direct gift under the Will is instead passed to something called a “Discretionary Trust”.
How does the Discretionary Trust work?
The Trust provides flexibility to provide the beneficiary with a lifetime ‘loan’ of their share of the estate (the £250,000 above), rather than by an outright gift.
The real essence and advantage of our Trusts is the ‘loan for life’ of the estate to the chosen Beneficiaries in the order you prescribe rather than gifting it all outright to your first chosen Beneficiary with no protection offered due to change of personal circumstances .
Please see our attached guidance notes for more detailed information.
Contact
If you would like further guidance or advice regarding variation of inheritance please see our guide below or contact us on:
