A Deed of Variation is a useful tool used by executors, trustees and beneficiaries in England and Wales to vary the terms of a deceased’s Will, and more specifically to bequeath a gift left to them in a Will (or an inheritance received in an intestate estate) to another individual.
There are many reasons why a Deed of Variation may be beneficial. The beneficiaries may want to correct a perceived injustice (if, for example, someone has been left out of the Will when they shouldn’t have), avoid legal proceedings, minimise their tax liabilities, or to set up a Trust.
However, where there are overseas assets, matters are often far less straightforward. Here we look specifically at how deeds of variation are interpreted in Italy and provide alternative solutions.
Italian Assets
Where the deceased left assets in Italy, in some cases a Deed of Variation would be an ideal solution. Where Italian law applies to the succession and the deceased left out certain close relatives in their Will (who would have had rights to their assets pursuant to Italian forced heirship laws), a Deed of Variation could vary the terms of the Will and distribute to these relatives the share of the assets that they would be legally entitled to.
However, there are numerous other scenarios which can play out, such as where an English Will is applied to the Estate, and all assets, including the Italian assets, are to be left to the named executors/trustees, who are then directed to manage the assets, sell these and/or distribute the same to the beneficiaries.
The problem with this second example, particularly where the ultimate beneficiaries are the spouse and/or the children, is that a Will worded in these terms overcomplicates the administration process in Italy, not to mention causes more taxes to be paid than there would be had the assets passed directly to the beneficiaries.
Children and spouses of the deceased in Italy will not be charged inheritance tax up to a value of 1 million Euro each; someone who is not related to the deceased at all will be charged at 8%. Accordingly, an Executor who is not related to the deceased will be charged the full 8%. These are additional taxes that could have been avoided.
Furthermore, if the beneficiaries do not wish for the immoveable property to be sold, for example, the only way that the property can pass from the executors to the beneficiaries in Italy is for there to be a gift of the property, by way of formal Deed of Donation.
This is not ideal as it will cause gift taxes, property transfer taxes as well as Notary’s fees to be incurred by the Estate, all of which again could have been avoided.
With this example as well, the first solution that comes to mind is a Deed of Variation to vary the terms of the Will. However, will this English Deed of Variation be recognised in Italy?
Succession
Italian law makes it clear that the terms of a Will cannot be changed by the beneficiaries following the testator’s death, and neither can any inheritance be varied in an intestate succession. Therefore, if Italian law applies to the succession of the assets in Italy, then an English Deed of Variation will not be legally recognised and cannot be used to vary the terms of the Will and how the assets are distributed.
However, if English law applies to the Italian assets inherited, then the English Deed of Variation could be deposited in Italy by way of a Deed of Deposit in Italy, prepared by a Notary Public and registered with the Notarial Archives in that country.
However, it is not guaranteed that the Italian Land Registry will accept the Deed of Variation, even if published by an Italian Notary.
It is worth also considering the additional costs involved; other than the Notary’s fees and registration fees in Italy, the Deed of Variation will be considered a gift from the original Beneficiaries to the individuals to whom the inheritance is being redirected, and gift taxes will be applicable.
Alternative ways to change the distribution of Italian assets
There are several other alternatives that could be considered and the best option will of course depend on the intended solution.
The named beneficiaries/executors could “renounce” their inheritance, if this means that their share would pass directly to the beneficiaries. This could be a perfect solution where one of the named beneficiaries in the Will does not want their share (for example, where a parent wishes to leave their share directly to their children).
In the case where a close relative, who has legal rights to the deceased’s assets in accordance to Italian forced heirship laws, then all parties involved can sign an “Atto di Re-integrazione” before a Notary Public, where said relative is effectively reincluded as a beneficiary.
If the parties simply wish to re-distribute the assets they have inherited, then again a Notarial Deed can be signed by all of them (after the Succession process is completed) by which the beneficiaries agree how these assets are to be distributed.
For example, children inheriting several apartments from their parent could decide that they wish to have one apartment each, rather than all be named as part-owners of all apartments.
An option that may be seen as slightly controversial is that of not publishing the Will at all. This would be a good solution where not having a Will would have the same desired outcome (e.g. that the assets go directly to the children, rather than passing via the executors), as having the Will published, with the added bonus of not having to publish the Will in Italy and pay additional costs and taxes. A Will is not required in Italy to proceed with a succession in Italy and dealing with an “intestate” succession is much simpler than it is in England.
Admittedly, in accordance with Art. 620 of the Italian Civil Code, whoever is in possession of a Will is legally required to publish it with a Notary Public in Italy. However, it is unclear what the penalties would be if a Will is not published, other than the obvious civil repercussions in the event that not publishing the Will would prejudice someone named in said Will.
If all beneficiaries are in agreement, they could sign a “Patto di Non Pubblicazione”, whereby they all agree that the Will is not to be published with a Notary and that the assets of the deceased are to be distributed in accordance with Italian intestacy laws. There is plenty of case law on this subject, all which seem to agree that this is a perfectly valid solution, only as long as it is not used to infringe on another individual’s legal rights. The feasibility of this option, as with all others, must be considered on a case-by-case basis.
Taking all the above into consideration, it is clear that the best solution of all would be for the testator to obtain specific legal advice on the distribution of Italian assets which will take into account all the variables and nuances. This should help to avoid any complications, additional costs, or taxes, being incurred by their chosen beneficiaries in the future.
