What is a deed of variation?

If you are looking into developing your estate plan or are wishing to amend one that is already in place, it is important to be acquainted with how a deed of variation operates. The following article will provide you with some information about how a deed of variation works and when you may need to use one.

What is it?

A deed of variation is a legal document that enables beneficiaries named in a Will to alter how the estate is administered. For example, it may allow for a particular beneficiary to reduce their share in order to give it to someone not named in the Will. The following list outlined the kinds of terms that a Deed of Variation can change:

  • Change of Trust Name
  • Change of Appointor or Trustee
  • Amend clauses within the deed
  • Exclude named or non-named beneficiaries
  • Insert clauses due to changes in legislation
  • Correct spelling errors

It is important to note that some changes will be more legally complex and will require tailored advice from either an estate planning legal professional or an accountant. This is due to the possibility that a change in the Will may result in different tax implications. Another consideration prior to establishing a deed of variation is to ensure that the terms of the Will allow for the Trustee to make the particular change.

Why would I need a Deed of Variation?

This legal mechanism may be useful in many situations and therefore it is important to understand how it works. The following situations may require a deed of variation.

  1. Avoiding a Will dispute

When a loved one passes away it is often a very emotional time. This can be made more difficult if a particular party decides to challenge the terms of a Will. Challenging a Will is allowed in all Australian States and can be raised if an individual believes they have not been given adequate provisions for proper maintenance, education or advancement in life. These sorts of disputes are called ‘family provision claims and are often tied up in court proceedings.

A Deed of Variation can be highly useful in this situation if the beneficiaries of the Estate are aware of another party’s wish to challenge the Will in Court. If the claim is likely to be successful, the beneficiaries can utilise a Deed of Variation to allow for adequate provisions to be made for this party before they commence court proceedings. This is likely to dramatically reduce the costs involved, as the cost of court proceedings are often exponential and can take years to be decided. It can also assist in ensuring the Estate is administered as soon as possible instead of being stuck in Court.

  1. A beneficiary refusing to accept their inheritance

Another situation where a Deed of Variation may be required is if a beneficiary named in a Will is refusing to accept their inheritance. Although this may sound like an uncommon occurrence, this may arise if receiving an inheritance could have other financial implications such as reducing that individual’s pension or another personal reason. Therefore, a Deed of Variation can be utilised to alter the terms of the Will and to ensure that that beneficiary is no longer named in the Will.

How can I get a Deed of Variation?

A deed of Variation is a legal document and thus it must be obtained from a certified legal professional and more specifically one that is in the area of Wills, Estate Planning or Probate. A lawyer will need to draft the Deed to ensure that it is in the correct legal form, and is legally valid, binding and effective. It needs to be signed by the existing beneficiaries named in the Will as well as the Executor responsible for administering the Estate. The act of the beneficiaries and executors signing the Deed indicates that all parties mutually consent to the terms of the Will being changed.

Engaging with a lawyer in this area can also help to ensure that the parties are aware of any tax implications that may arise as a result of a Will being varied. This could include capital gains tax or other financial benefits such as Centrelink that may change if an inheritance is being received.

If you are a named beneficiary in a Will, are expecting an inheritance and would like tailored financial advice on what to do with this money, please click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.

This information is purely factual in nature. Please do not rely on this information to make any financial decisions as this information has not been tailored to your personal. circumstances. If you would like financial product advice or services please let me know and I will set up an appointment for you. Any advice in this email is of a general nature only and has not been tailored to your personal objectives, financial situation and needs. Before acting on this advice, you should consider whether it is appropriate having regards to your personal objectives, financial situation and needs. Before making a decision to acquire a financial product, you should obtain and read a Product Disclosure Statement (PDS) relating to that product, it is important for you to consider these matters and to seek appropriate advice. The material contained in this email is based on information received in good faith from third party sources, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Past performance is not a reliable guide to future returns. Licensee EPG Wealth Pty Ltd 529273 – associated employees or agents may have an interest in or receive monetary or other benefits from the financial products and services mentioned in this email.

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