Sometimes — But the Survivor Cannot Simply Rewrite It
Once the first homeowner dies, the trust created by their Will comes into existence.
From that point, the deceased person’s wishes are no longer simply part of a Will which can be replaced.
The trustees must administer the trust according to its terms. But it is important to choose reliable Trustees – hopefully your children!
That does not necessarily mean the arrangement can never be changed.
But any change depends upon things such as:
- what the Will says;
- who the beneficiaries are;
- whether everyone affected agrees;
- whether children or unborn beneficiaries are involved;
- the tax consequences;
- and how long has passed since the death.
The Survivor Cannot Simply Change the Deceased Person’s Will
Suppose David dies and his Homeowner Protection Will protects his interest in the house ultimately for Emma and James or their children.
Susan survives him.
Susan can change her own Will.
But she cannot simply make another Will saying:
“I have decided David’s protected share should now go to somebody else.”
David’s Will has already taken effect.
His trust is now a separate legal arrangement.
But the Trust Can Contain Flexibility
Good drafting can give trustees useful powers.
Depending upon the Will, they may be able to deal with:
- selling the property;
- buying a replacement home;
- investing trust money;
- advancing capital;
- surplus money following downsizing;
- replacing trustees;
- and other practical changes.
Those powers should not allow the trustees simply to ignore the purpose of the trust.
But they can stop it becoming unnecessarily rigid.
Can a Deed of Variation Be Used?
Sometimes.
Beneficiaries can sometimes agree to change how an estate passes after somebody dies.
This is commonly referred to as a Deed of Variation.
A variation can potentially:
- alter a gift;
- create a trust;
- change a trust;
- remove a trust;
- or redirect property elsewhere.
For particular Inheritance Tax and Capital Gains Tax treatment, the variation will normally need to satisfy the relevant requirements and be completed within two years of the death.
Everybody Who Loses Out Normally Needs to Agree
A beneficiary cannot normally have their entitlement reduced simply because somebody else thinks another arrangement would be more convenient.
Suppose:
- Susan has a lifetime right to occupy the home;
- Emma and James inherit the protected share afterwards.
If everyone affected is an adult, has mental capacity and agrees, there may be considerable scope to rearrange matters.
But if Emma says:
“Dad deliberately protected this inheritance and I want his Will followed,”
that can prevent a consensual variation which reduces Emma’s entitlement.
What If Children or Unborn Beneficiaries Are Involved?
That makes things more difficult.
Suppose David’s Will says:
“Emma inherits, but if Emma dies first, her children inherit instead.”
Those grandchildren may already have potential interests in the trust.
Some may be:
- under 18;
- not yet born;
- or not yet identifiable.
They cannot simply sign away their interests.
A court application may sometimes be required before those interests can be affected.
What Is Special About the First Two Years?
The two-year period after death is particularly important for tax treatment.
If a qualifying variation is completed within two years and the statutory requirements are satisfied, it can sometimes be treated for certain Inheritance Tax and Capital Gains Tax purposes as though the deceased had made the revised arrangement themselves.
But this does not mean:
“After two years the trust can never be changed.”
Later changes may still be possible.
The legal and tax consequences may simply be different.
Can the Trust Be Ended Early?
Potentially.
Suppose Susan has a lifetime interest and Emma and James are the only ultimate beneficiaries.
If everyone is:
- an adult;
- mentally capable;
- legally entitled to the relevant interests;
- and in agreement,
there may be ways to bring the trust to an end or rearrange it.
But doing so may have:
- Inheritance Tax consequences;
- Capital Gains Tax consequences;
- care-funding implications;
- benefits implications;
- and consequences for the inheritance protection itself.
So ending the trust should never be treated as a simple administrative shortcut.
Why Might a Family Want to Change the Trust?
There can be perfectly sensible reasons.
The survivor wants to move
Usually, a properly drafted Will should already allow this without ending the trust.
The survivor needs more capital
Perhaps money is needed for adaptations, care or other expenditure.
Whether capital can be released depends upon the Will.
Equity release is unavailable
A lender may refuse to lend while the trust remains in place.
The family may then have to consider whether changing or ending the trust is worth the loss of protection.
Family circumstances have changed
A beneficiary may have died, become vulnerable or no longer need the inheritance in the way originally expected.
Tax rules have changed
A trust may last for decades.
The law in force years later may be very different.
Convenience Alone Is Not Enough
Suppose Susan wants equity release and the lender says:
“We will only lend if David’s trust is brought to an end.”
That may be possible.
But it should not automatically be done simply because it is convenient.
David created the trust to protect an inheritance.
Ending it could expose the protected property again to:
- Susan’s future Will;
- remarriage;
- a new partner;
- financial difficulties;
- care circumstances;
- or other risks.
The family needs to understand what protection is being surrendered.
Can the Trustees Change the Ultimate Beneficiaries?
Not simply because they prefer somebody else.
If David’s Will says Emma and James ultimately inherit, the trustees cannot normally decide:
“Actually, we think Robert deserves it instead.”
They must follow the Will.
Any ability to change beneficial interests would need to come from:
- powers contained in the trust;
- agreement of those legally entitled;
- legislation;
- or an appropriate court order.
What If Everybody Agrees?
Agreement can create much more flexibility where every relevant beneficiary is:
- known;
- an adult;
- mentally capable;
- and willing to participate.
But before changing anything, establish:
- What does the Will actually say?
- Who has an interest?
- Is anybody under 18?
- Could unborn beneficiaries inherit?
- What tax might arise?
- What protection would be lost?
- Does the timing matter for the intended tax result?
A Simple Example
David dies.
His Will says:
Susan may occupy the home for life.
After Susan dies, Emma and James inherit equally.
Five years later Susan moves permanently into sheltered accommodation.
That does not automatically mean the trust disappears.
The Will may allow:
- the property to be sold;
- the capital to remain invested;
- Susan to continue receiving whatever benefits the Will gives her;
- and Emma and James to remain the ultimate beneficiaries.
If the family instead wants to terminate or fundamentally alter the trust, that is a separate legal decision.
What If One of the Beneficiaries Has Died?
The Will may already answer that.
For example:
Emma’s share passes to her children if she dies before the trust ends. (That would be my general advice – but it is YOUR choice.)
If so, those grandchildren may now have interests in the trust.
That can make a later variation more difficult, particularly if they are minors.
Always establish who the current beneficiaries are before assuming everybody necessary has agreed.
Can a Court Change the Trust?
In some circumstances, yes.
A court can sometimes approve changes affecting people who cannot consent for themselves, including minors and unborn beneficiaries.
But court proceedings bring:
- cost;
- delay;
- uncertainty;
- and formality.
Good drafting should reduce the likelihood of a court application ever being necessary.
What About Tax?
Changing a trust can have important tax consequences.
Issues may include:
- Inheritance Tax;
- Capital Gains Tax;
- Income Tax;
- whether the change creates a new settlement;
- and whether existing tax treatment is preserved.
So a trust should not be altered simply because all the family members agree without first considering the tax position.
Does a Deed of Variation Rewrite the Original Will?
Not literally.
The deceased person’s original Will remains their Will.
A variation changes how particular beneficiaries agree that the estate should pass. But all affected beneficiaries must agree. It is perfectly possible to change parts of a Will – and quite common where inheritances go to people who just do not need them, so it may be better to skip a generation.
For some tax purposes, the legislation may then treat the revised disposition as though it had been made by the deceased.
That is an important distinction.
Can the Survivor Still Change Their Own Will?
Yes.
A Homeowner Protection Trust does not freeze the survivor’s personal estate planning.
Susan can still decide what happens to:
- her own share of the property;
- her savings;
- her investments;
- and her other assets.
What she cannot ordinarily do is use her own Will simply to rewrite David’s existing trust.
[Can My Spouse Change Their Will After I Die? →]
Better to Build Flexibility In From the Start
Rather than relying upon everyone agreeing to change the trust later, a good Homeowner Protection Will should anticipate foreseeable events.
It should consider:
- moving house;
- downsizing;
- the survivor entering care;
- replacement trustees;
- surplus capital;
- beneficiary deaths;
- and other common changes.
The aim is:
protect the inheritance without making the trust unnecessarily inflexible.
In Simple Terms
Can the survivor simply change the deceased person’s trust?
No.
Can the trust ever be changed?
Potentially, yes.
Can a Deed of Variation sometimes be used?
Yes.
Are the first two years after death important?
Yes, particularly for tax treatment.
Do beneficiaries who lose out normally need to agree?
Yes.
What if children or unborn beneficiaries are affected?
Court approval may sometimes be needed.
Could changing the trust have tax consequences?
Absolutely.
Should the trust be changed simply because it has become inconvenient?
Not without considering what protection would be lost.
Protection With Sensible Flexibility
A Homeowner Protection Trust should not be so easy to change that the protection becomes meaningless.
But neither should it be so rigid that normal life becomes impossible.
The best arrangement provides:
clear protection for the ultimate beneficiaries
practical flexibility for the survivor
and
sufficient trustee powers to deal with foreseeable change.