Deed of Variation Contract: Understanding its Definition and Purpose
A deed of variation contract, also known as a deed of family arrangement, is a legal document used to change the terms of a will or a trust. This document allows beneficiaries to restructure or redistribute the assets they receive following the death of the testator or grantor. The deed is executed by the beneficiaries and the personal representatives (executors or trustees) of the estate to reach a mutual agreement on the revised terms.
The purpose of a deed of variation contract is to help beneficiaries achieve their desired outcomes without the necessity of going through a lengthy and costly court process. The contract can be useful when a will or trust document does not align with the beneficiaries’ needs, or when unforeseen circumstances arise.
For example, if one of the beneficiaries of a will is unable to manage their inheritance due to a physical or mental incapacity, a deed of variation contract can be used to redirect their inheritance to a trust established for their benefit, rather than being paid directly to them. Alternatively, if the beneficiaries want to reduce their tax liability by redirecting their inheritance, the deed of variation contract can be used to achieve this.
A deed of variation contract can only be executed within two years of the date of death of the testator or grantor, and it must be signed by all beneficiaries who are affected. Additionally, the deed must be completed and registered with HM Revenue & Customs if there are any changes to the inheritance tax liability.
It is essential to seek the advice of a qualified solicitor or trust specialist before entering a deed of variation contract. They can provide guidance on the legal and tax implications of the changes, and ensure that the deed is properly executed and registered.
In conclusion, a deed of variation contract is a legally binding document used to change the terms of a will or trust. It can be beneficial when unforeseen circumstances arise, or when the beneficiaries’ needs do not align with the original will or trust document. However, it is important to seek professional advice when considering a deed of variation to ensure that it is properly executed and registered, and that all legal and tax implications are taken into account.