Deed of Variation: Making a Change to an Existing Will
3 Nov 2023 | Katie de Swarte
Table of Contents
What is a deed of variation?
After someone dies, it is possible for the beneficiaries to change the way the estate is distributed instead of following the instructions in the will. A deed of variation is sometimes used when beneficiaries want to split the assets more fairly or provide for someone who was not included in the will or intestacy.
A deed of variation is a legal document which can be used to alter the terms of the will after someone dies. The process can be used to redirect all or part of someone’s inheritance to another beneficiary, add a new beneficiary, or even remove a beneficiary completely.
Why would I need a deed of variation?
After someone dies, their estate needs to be wound up and then distributed to the beneficiaries named in the will. If there is no will, the law decides who the beneficiaries are under the rules of intestacy. However, there may be several reasons why the beneficiaries wish to change the will. These include:
- Splitting the distribution more equally between the beneficiaries
- Ensuring that someone who is struggling financially receives a larger share of the estate
- Redirecting the inheritance directly to children, so it skips a generation and is only assessed for Inheritance Tax once rather than twice
- Providing for someone excluded from the will, for example, a grandchild who was born after the will was made
- Providing for someone who does not inherit under the intestacy rules, such as an unmarried partner
- Making gifts to reduce the amount of Inheritance Tax that needs to be paid by the estate
How do deeds of variation work?
Deeds of variation are flexible documents. Any adult beneficiary who has capacity can sign one to redirect their share to someone else, even if the recipient was not included in the original will. Any of the beneficiaries giving up some or all of their inheritance under the will or the intestacy rules would need to sign the deed of variation. If the reallocation negatively impacts another beneficiary, for example, by reducing their share from 30% to 25%, then they would need to give their consent.
A deed of variation must take place within two years of the date of death to be effective for tax purposes. If it is completed within the two year period, the changes effected by the deed will be ‘read back’ in to the will or intestacy rules and IHT will be assessed as if the person who has died included the changes in their will. A deed of variation can be completed before or after the grant of probate is issued, but it is usually a good idea to agree this with all involved before any assets are transferred.
What are the pros and cons of a deed of variation?
A deed of variation can provide for beneficiaries who have not been included in a will or the provision is insufficient for the beneficiary’s needs. This can be especially useful if there is no will or when family dynamics are complex. Unmarried partners, relations by marriage, close friends and carers have no right to inherit when someone dies without leaving a will, but a deed of variation can provide for them.
The disadvantage is that a deed of variation can only be made once concerning the same assets. Once made, there’s no going back. It is vital that you take legal advice from an expert in this area of law to ensure there are no unintended consequences of signing a deed of variation.
What are the tax consequences of signing a deed of variation?
Signing a deed of variation carries with it certain tax implications. These tend to be favourable. One of the more popular reasons for signing a deed of variation is to make sure that Inheritance Tax reliefs don’t go to waste. For example, if a property qualifies for Business Property Relief and the spouse inherits this asset, then the relief is wasted as the spousal transfer is already exempt from Inheritance Tax.
The deed of variation must contain certain elections to ensure that any tax advantages are properly claimed and that the variations are “read back” to the date of death. You will need a solicitor to guide you through this process. Without observing the proper formalities, the deed may lose its tax advantages.
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