Deed of Variation

Ask the Expert

My brother and I would like to know if it’s possible to make a gift to charity from our late mother’s estate after her death, even though she didn’t include it in her will?  In the last few months of her life, she had care from our local hospice and was planning to make a bequest to them before dying, but didn’t get around to doing so.  We understand her estate will incur an Inheritance Tax bill as she was quite wealthy, and that if we make the gift out of the estate, that will reduce the tax bill.

Carl responds:

It’s certainly the case that a gift to a charity would reduce the value of your mother’s taxable estate for Inheritance Tax (IHT) purposes.  However, in order for the gift to be counted as made from her estate, you’d need to arrange for a charitable deed of variation to the will.

I suggest you have a discussion with an independent financial adviser who specialises in IHT matters before proceeding with the application for the deed of variation.  It would be important to understand a number of factors before deciding on the size of the donation to be made.  Firstly, you should calculate the potential IHT due on her estate, taking into account the provisions in her existing will and the various nil rate bands and exemptions available.  You can then explore the impact of the reduction in her taxable estate brought about by different levels of potential donation.

Another factor to bear in mind is that if your chosen donation equates to more than 10% of your mother’s net estate – after settling any debts, paying funeral costs, and the cost of administering her estate – the rate of IHT payable on her taxable estate drops from 40% to 36%.

Do get legal advice about applying for a charitable deed of variation.  It can be used to carry out the intended action of the deceased, as in your case, or when some or all of the beneficiaries feel that they would like a different distribution of the deceased’s estate.  It will need the support of all the beneficiaries affected by the variation.

Any opinions expressed in this article do not constitute advice.