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Following on from last week’s article, ‘Planning Options when a client inherits through the rules of intestacy’, this piece will outline a few of the potential pitfalls in the estate planning and solutions for clients who are named as beneficiaries in a basic Will.

Yes, it’s true that the testator has expressed their wishes. However, in the time that has lapsed between the Will being written up and the testator passing, considerations may have changed. The basic Will cannot consider beneficiaries’ changes in circumstances, changes in legislation and/or changes in how the testator wanted to leave their assets on death.

It is always prudent for all clients to review their estate planning annually or when they go through any significant life changes, such as a divorce. It is important to note that once the Will has been written (and unless updated) the personal representative is bound to administer the deceased’s estate in accordance with the Will, which could result in the beneficiaries losing their inheritance should something in their life go wrong

What might be the estate planning solution for the beneficiaries?

There may be options available to the beneficiaries to try and mitigate the above. The beneficiaries may be able to vary the terms of the Will to create greater flexibility, protection and tax efficiency.

A Deed of Variation can allow for greater flexibility in how assets are distributed; the beneficiary can fully or partially alter their entitlement or direct their share to a trust. This would allow for greater protection, as well as preserving their inheritance for future generations. Don’t forget that a beneficiary of a Will can move assets to a trust and then become the beneficiary of that trust, allowing them to take ‘the value outside of their estate for IHT purposes’!

In addition, beneficiaries have the option to vary to parties not listed within the Will, for example, varying to their children will treat them as a new beneficiary of the original estate. In short, the variation will not start the ‘seven year clock’ as it is treated as inheriting from the Will.

For more information about using Deeds of Variation, join the next Superhero Webinar 99 here, or get in touch with our experts.