What if you are unexpectedly left out of a family member’s will?
This is a common scenario, with plenty of high profile cases – but there are options to resolve the situation without falling foul of inheritance tax.
If other family members who have inherited a sum are in agreement, they may be willing to hand over a portion of any assets to you.
However, if they do so without taking the correct financial steps the money will be classed as a gift. If they then pass away within the next seven years, the sum is likely to fall under their estate, and be subject to tax.
Another option is to use a deed of variation. This is a document designed to redirect inheritance in someone’s Will up to two years after they die.
This enables the beneficiaries of an estate to alter the sum someone else is to receive in inheritance, without the cost of going to court. If this document is used, any sum you inherit will be considered to have always been due to you.
A family member dies and passes on the inheritance to their children when younger generations would benefit more from the money. The beneficiaries are able to redirect cash to a younger family member using a deed of variation.
Or two sisters inherit from their mother, with a third left out of the will. The third cared for the mother in her old age, so the two sisters agree she should receive a portion of the inheritance. They can use a deed of variation to pass on this sum.
Or money is left to three grandchildren but two more have been born since the Will was updated. A deed of variation can be used to spread the inheritance among all five.
Or a spouse or civil partner dies without making a Will or this is lost – a deed of variation can be used to rectify this.
If any of the beneficiaries are under 18 or mentally incapacitated, court approval will be needed for a deed of variation. This may significantly increase costs. Check out the HMRC checklist at gov.uk/alter-a-will-after-a-death.
How to do it
All beneficiaries must agree to the deed of variation. The next step is to see a solicitor, as with a complex legal document it’s best to seek professional advice.
The deed must be in writing and signed by anyone who wishes to change their inheritance under the Will. However, the timeframe is two years – so make sure to stick to this. It’s still possible to pass on sums after this, but you won’t be able to avoid the risk of inheritance tax.