Deed of Variation Trust – protecting your inheritance

Establishing a Deed of Variation trust is an excellent way to pass your inheritance on, immediately outside of your estate for inheritance tax purposes.

If you have inherited in the past 2 years and would like to benefit your children, grandchildren, or other beneficiaries, whilst still being able to access funds if required, a Deed of Variation trust might suit your needs.

What is a Deed of Variation trust?

This is a type of family trust, which can be used to set aside substantial wealth for selected beneficiaries on your terms whilst reducing inheritance tax on your estate. Family trusts offer protection for your loved ones, whilst retaining flexibility and control over who will receive funds and when, in a tax efficient manner.

A Deed of Variation trust is fairly unique insofar as you have the choice to remain as a nominated beneficiary so that you can access the funds should you need them in the future whilst any funds that you don’t need can remain outside of your estate.

Is a Deed of Variation trust right for me?

When an inheritance is placed into a Deed of Variation trust, it is immediately outside of your estate for inheritance tax purposes. This could allow a further 40% of the value of your inheritance to pass to your beneficiaries than if you receive the inheritance yourself. For example, on an inheritance of £1 million, the inheritance tax saving would be up to £400,000.

Are there any downsides?

Even if you are a named beneficiary of the trust, it is up to the trustees to decide whether you should benefit from the funds in the future. You can mitigate this risk by choosing who the trustees are and you can also be a trustee yourself.  If you decide not to be a beneficiary of the trust, you will not be able to benefit from the funds in the future and so you must be confident that you will not have to call on the funds.

Why choose Ludlow? 

We can offer you a dedicated Trust Manager who has the expertise to take you through the process of setting the trust up in accordance with the necessary legal and tax requirements.

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