What is a deed of variation?
A Deed of Variation is a document that allows the beneficiary/beneficiaries of an estate to alter the distribution of a deceased’s assets after their death.
Sometimes a Deed of Variation is referred to as a family agreement deed or a deed of family arrangement. These terms can be used when the arrangement to the vary the distribution is being made between family members.
Can you use a Deed of Variation to alter a Will?
When the deceased left a Will that dictates the distribution of their estate, a Deed of Variation can be used to alter that intended distribution. Any person who receives a gift under the will can redirect their inheritance to another person. The recipient of that redirection can be anyone irrespective of whether they are named in the will. In effect, by using a deed of variation it is possible to change a Will after the death of the testator.
Can you use a Deed of Variation to alter intestacy?
Where there is no Will the distribution of the estate is governed by a set of rules called the “Laws of Intestacy”. Even when the rules of intestacy are being used, it is still possible to use a deed of variation to make changes to how the inheritance will be distributed. Rather than using a deed to change how the deceased wanted the estate to be shared, a deed is used to vary how the law dictates the estate should be shared.
Deed of variation for property
A deed of variation is also a standard document used to vary the terms of a lease for a property. In this context, a property deed of variation has an entirely separate meaning from those in the context of a Will.
Why would you use a deed of variation?
There are many reasons why someone would want to vary a will after death. Over time circumstances can change within a family and if a Will has been written, if not updated regularly, it can easily become outdated and not reflect the current circumstances. When a person passed away with an outdated Will or no Will at all it may be desirable or necessary to rearrange how the estate is distributed.
Here are some examples of when a deed of variation may be useful.
- To avoid a potential dispute over the provisions of the Will or a claim as to its validity. For example, perhaps a long-term partner has been omitted from the Will as it was written when the deceased was single. Using a deed of variation could prevent a potential claim under the Provision for Family and Dependents Act 1975.
- To include children or grandchildren that were born after the Will was written and were not named or provided for under the terms of the Will.
- To honour verbal requests or verbal instructions made by the deceased that were not accounted for under the terms of the Will.
- To alter the inheritance tax liability of the estate. If the will does not distribute the estate in the most tax-effective way, a deed of variation can be used to redirect assets to use more of the available allowances and reduce an estates Inheritance tax liability. It is recommended to seek professional advice when considering using a deed of variation for inheritance tax purposes.
- To reduce Inheritance Tax liability on a beneficiary’s estate. If inheriting from the deceased’s estate was to cause the beneficiaries estate to become taxable or increase the taxable amount upon their death, they may decide it beneficial to bypass inheriting the assets directly themselves and redirecting the deceased’s assets to children or grandchildren. It is recommended to seek professional advice when considering using a deed of variation for this purpose.
At Final Duties we have a specially selected panel of solicitors all of which are qualified and experienced in writing deeds of variation. For a fixed fee probate quote including a deed of variation speak to a member of our team on 08007318722 or send us an inquiry via our website and one of our advisers will give you a call.
Who can use a Deed of Variation to change a Will?
A beneficiary or multiple beneficiaries named in the Will can choose to use a deed of variation. If there is no Will, a beneficiary or beneficiaries entitled under the rules of intestacy can choose to use a deed of variation.
A deed of variation can only be used by a beneficiary to alter their own inheritance. A beneficiary or executor cannot vary another beneficiary’s inheritance without that beneficiary’s agreement. The executor or administrator of the estate will be responsible for facilitating or acting upon the redirection of inheritance, but an executor cannot change a will through a deed of variation themselves.
What are the requirements for a deed of variations?
- It must be agreed and signed by all the beneficiaries who the alteration affects.
- It must also be agreed and signed by all the executors if the changes affect Inheritance tax.
- The deed must be written and completed within two years of the date of death.
- It must clearly state the change to the estate and identify the person who will be benefitting from the change.
- It must contain a statement that that declares if the variation will have an effect on Inheritance tax and/or capital gains tax.
- An application from the court for the consent of any beneficiaries who are under the age of 18.
- If the variation means there’s more inheritance tax to pay you must send a copy to HM revenue and customs within six months.
Who signs a Deed of Variation?
The beneficiaries whose inheritance is adversely affected by the change must always sign the deed of variation. An executor/executors will often also sign the deed but is only required to sign the deed if the changes result in an effect on inheritance tax or capital gains tax.
Can I write a deed of variation myself?
You can write a deed of variation yourself, however, unless the redirection is very simple and straightforward it is recommended to seek assistance from a professional. A professional will be able to advise on whether a deed is appropriate and fits what you want to achieve, as well as write the deed in the most effective way to reduce ambiguity.
If you choose to write a deed yourself you must ensure it meets the conditions as laid down in the inheritance tax instrument of variation checklist detailed in HMRC’s deed of variation document IOV2. You can find simple deed of variation templates online but you must be careful to ensure they are appropriate for your purpose.
Why can’t I just gift my inheritance to someone else after I’ve received it?
If a beneficiary accepts an inheritance and subsequently gives it away to someone else, depending on the value of the gift, it could be taxable if the person giving the gift passes away within 7 years. If they die within seven years, the gift will be added back into their estate for Inheritance tax purposes. This may result in Inheritance tax being payable if the value of their estate including the gifts exceeds the total of IHT allowances as available. You can read more about the 7-year rule.
Using a Deed of Variation bypasses the intended beneficiary entirely. This means the redirected inheritance never becomes part of their estate. The assets will pass directly from the estate of the deceased to the chosen recipient. As the assets are not inherited by the beneficiary named in the Will, the assets will not be considered as part of the estate for inheritance tax purpose if they were to die within 7 years.