When a 97-year-old woman died, the bulk of her estate passed to her sister, who herself died only months later, and the remainder – ‘the residue’ – was left to four charities.
Because of the impact of Inheritance Tax (IHT), there would have been a very small distribution to the charities.
The woman’s sister’s will was very similar and the net effect was that the charities were only entitled to the value of the estate less the IHT payable on the first death.
The administrator of the two estates wrote to the charities concerned and proposed that a ‘deed of variation’ be entered into as regards the first will, whereby the sister’s entitlement to the estate would be waived. The effect would be that the entire estate of the first sister to die would pass to the charities and no IHT would be payable.
Three of the charities agreed to the plan (the fourth did not reply) and a deed of variation was drafted and sent to HM Revenue and Customs to obtain repayment of the IHT paid. However, the deed was wrongly drafted and, as submitted, had no effect.
This necessitated a visit to the High Court for the deed of variation to be ‘rectified’ (the legal term for correction of a document in order to make sure it achieves its intended effect).
The Court agreed that the deed was in error and did not achieve the intended aim, which was clear.
The Court permitted the deed of variation to be altered to give effect to the original intention.
Where all the beneficiaries of a will agree, a deed of variation can often be an effective method of making the will achieve better ends for the beneficiaries than it does in its original form.
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