Our Experts in Probate Applications and Estate Administration Discuss Giving Up Inheritance
Posted on 9th December 2020
It may seem like a bizarre concept to some people- if you have been left inheritance in a person’s Will, why would you want to give it up?
Many people receive their gifts or money and would not have a need to pass it up. However, for others, receiving inheritance may affect their lifestyle or their Estate and inheritance tax on their own death. For example, their Estate may be near the threshold for paying inheritance tax already and, therefore, diverting the inheritance would prevent their Estate being over the limit. In addition, if the assets owned by the deceased include those which could be subject to an exemption such as Business Property Relief, a Deed of Variation may prevent these passing directly to a spouse, which would waste this relief.
That being said, if you have no reason to ‘avoid’ your inheritance then do not worry: there is no need for you to “give it up” or “pass it on”. If you have been left a gift by your loved one in their Will, you are entitled to receive this and it is your decision about whether or not you keep this.
‘Passing on’ Inheritance to the next beneficiary
One option to not accept inheritance that you are entitled to would be to change who receives the gift under the Will, using a post-death variation, also known as a Deed of Variation.
For the purposes of inheritance tax, this variation would be treated as though the deceased themself had put it in place, rather than the originally intended beneficiary. This is beneficial because it can avoid tax being adversely affected and, if you have sufficient funds and do not need these yourself, you are not losing out at all.
However, you should be aware that any variation must be made in writing and – usually – signed; this document is generally a Deed of Variation. In addition, the Deed must be completed within two years of the death to qualify as an exemption under the Inheritance Tax and Capital Gains Tax Rules. It must also include a statement setting out that the tax exemption rules are to apply.
When will a Deed of Variation not be helpful?
There may be some circumstances when a beneficiary hopes to use a Deed of Variation, when it will not always be advisable.
For example, if a beneficiary is in receipt of means-tested (or even other benefits), they may worry that receiving their inheritance will affect these. Unfortunately, refusing to receive your inheritance will not prevent the state from reducing or stopping your benefits, as they may decide that you purposefully deprived yourself of this money.
Another similar circumstance would be when a person is receiving local-authority funded care, who decides to re-direct their inheritance. The local authority may class this as a deliberate deprivation of assets, and may wish include the inheritance in their calculations.
What are the importance aspects of a Deed of Variation?
The important points to remember are the two-year rule and, perhaps the most important: if a Deed is not entered into properly, it may not be valid and therefore you may find that it does not have the intended effect.
Can a Solicitor help with changing a Will?
Given what our team has discussed above, when you are dealing with a person’s Estate and you think that a Deed of Variation may be of use to you, you should seek legal advice from experts in Probate applications and Estate Administration, such as our team at MG Legal. You can contact us online, here, or email the team to firstname.lastname@example.org and a member of the team will contact you to discuss your matter. Alternatively, give us a call at your local office, where a member of the team should be able to help.
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