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Deeds Variation - The 2 Year Rule

by: Janine Byrne

Deeds of Variation - The 2 Year Rule

Introduction

I recently received a query from a practicing solicitor asking for advice on using Deeds of Variation. The solicitor in question was acting on behalf of clients who wished to alter the terms of their father's Will to afford a fairer disposition of the assets amongst family members. Ordinarily this would one of the situations where a Deed of Variation could be employed. However, the testator's death was 6 years ago.

The query was despite the lapse in time, could a Deed of Variation still be used without asking for it to be applied retrospectively for the purposes of inheritance tax and capital gains tax?

The Purpose of the 2 Year Rule

To recap from my previous article, in order to be valid a Deed of Variation must comply with 3 conditions;

Must be made in writing.
All persons who were original beneficiaries in the Will and any persons who benefit from the proposed variations in the Deed must sign the Deed.
It cannot be given for money or money's worth.
It must be made within 2 years of the death of the decedent.

One of the most crucial uses for a Deed of Variation is to affect the tax liability on an estate. Therefore, for a Deed to be valid it must be made within 2 years of the death of the testator in order to be applied retrospectively for Capital Gains Tax and Inheritance Tax. If a Deed of Variation fails to comply with this - or any of the other conditions - it ceases to have retrospective affect for tax purposes, and amounts to nothing more than a transfer of value - namely, a gift.

Having liased with the Inland Revenue on this subject, it is clear that Deeds of Variation are only to be used within the 2 year period as, to quote an Inland Revenue adviser "there would be no point in using such instruments after that time as it would afford no tax saving benefit".

Changing the Will after the 2 Year Period

So, what do you do if you wanted to change the terms of a Will after the 2 year period? As stated above, where a Deed of Variation does not comply with the 2 year rule, any dispositions which the beneficiaries seek to make via the Deed amount to nothing more that simple transfers of value, gifts. Thus, the approach to adopt would be to make Potentially Exempt Transfers of the assets which the beneficiaries seek to redistribute.

This is as simple as handing over the gift, or saying 'I give up my interest and gift it to you'. It is always advisable however, particularly where substantial interests in property are involved, to write a memorandum of the potentially exempt transfer. Such a memorandum should include the name of the person giving the gift, to whom the gift is given and the date.

JsByrne
LLB (Hons) LPc.
www.Draft-Your-Will.com

About the author:
Miss JsByrne holds a Bachelor of Law degree with Honours & a post-graduate diploma in Legal Practice. Also gained qualification in Wills Writing & is the owner/author of and DYW Wills & Estate Planning Newsletter -

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Seven Sets of Documents You Need For Your Divorce
by: Scott Morgan

This article is designed to give someone who is considering or planning for the possibility of divorce an idea of what documents are needed. Even if you believe your case is ultimately agreed to and settled without a trial, you will be in a much better position if you already have the relevant documents in your possession. Better safe than sorry.

You should locate the relevant documents, make copies, and keep them somewhere secure, like your office or with a friend. You will then have access when it is needed.

Here are the most important seven categories of documents you should focus on.

1. Income Documents

Your spouse's income is relevant to a number of issues in a divorce case. At a minimum, get your spouse's last paycheck statement and your most recent tax return. Ideally, you would have access to all tax returns filed during the marriage, along with all supporting documents and schedules.

2. Bank Records

The monthly bank statements are very important and can lead you to other documents (cancelled checks, deposit slips, registers, etc.) that you also may need to obtain. Get at least the most recent statement for each account that is either held in your name, your spouse's name, or jointly. If possible, get copies of all statements going back to the date of marriage. In most cases this volume of records is not required, but in some cases these records can be very helpful and even necessary to analyze the case.

3. Retirement and Other Investment Records

Often the biggest asset a couple will own will be a 401k or pension account. So you will definitely want the most recent account statement and ideally all statements dating back to the time of marriage. Also, the last statement prior to marriage can be very significant (especially in community property states) to show the pre-marriage balance.

4. Credit Card statements

Again the most recent statements are a necessity, but a lot of important evidence can be garnered from the historical statements. In some cases, the credit card statements will show questionable transactions that can be of real evidentiary value. For example, they might show evidence of gifts or dinners purchased for paramours, questionable hotel rentals, or other dubious purchases.

5. Real estate documents

The most important real estate documents are the Deed of Trust and Warranty Deed for any property you currently own. If you have the entire file from (the giant stack of paper you got after the closing) for each real estate purchase or refinance transaction during the marriage it can be helpful. Additionally, documents evidencing real estate owned by either spouse prior to marriage can be significant, especially in community property states.

6. Mortgage statements & any Other Debts

You should get the most recent statements showing the current payoff balance for any other debts. For those debts that have only a coupon book with no regularly generated statements showing the current balance, you will probably need to contact the creditor by phone for the current payoff information.

7. Relevant emails or other correspondence

Correspondence or emails can be extremely helpful (or damaging, depending on your viewpoint) pieces of evidence in the case. Whether the communication is between spouses or between a spouse and some third-party, the communication is potentially relevant. Two common examples would be where your spouse makes a damaging admission about some issue in the case, or communications with paramours.

Conclusion

Determining which documents you need to obtain for your divorce case can be a very time-consuming and daunting task. Use this list as a starting point and discuss your situation with a quality divorce attorney. This person should be able to advise you specifically on the documents you need to obtain in order to protect your interests.

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