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Deed of Variation: Changing a Will After Death

What is a Deed of Variation?

• A deed of variation is a legal document that allows you to change a Will or, in the instance there is no Will, change how the intestacy rules operate and apply to the estate.

• It can be used to alter the distribution of assets, add beneficiaries, or make other changes to Will or Intestacy rules.

• The deed must be signed by all parties involved and witnessed for it to be legally binding.

• You should seek professional advice before making any changes, as there may be tax implications or other considerations that need to be considered.

• A deed of variation may also be used to reduce your inheritance tax liability by transferring some of your entitlement from one beneficiary to another.

• It is important that the deed is drafted correctly to meet all legal requirements and not create unintended consequences for any party involved in the transaction.

Why would someone want a variation?

Sometimes there is no valid Will or the Will is out of date because it had not been rewritten to reflect the changed circumstances of the deceased person at the time of their death. Or there is no Will at all and the Intestacy Rules mean that what should happen does not reflect what the deceased person would have wanted for how their estate is distributed.

A Beneficiary may prefer not to inherit everything they are entitled to because they wish to pass on some or all of what they are due to other individuals they may consider more deserving or so that everything is more in line with the wishes of the deceased person.

There may be Inheritance Tax (IHT) (and Capital Gains Tax (CGT)) advantages of making some tweaks to the situation resulting from the Will or intestacy.

When is a Deed of Variation required?

Any adult individual who has mental capacity and is entitled to benefit from a deceased person’s estate is free to inherit and give away their inheritance to whoever they choose. However, by making what is known as a Deed of Variation, the law allows the gift to be treated as if it was made by the deceased person directly from his rather than the intended recipient’s estate.

To qualify for the favourable tax treatment that may result from the changed inheritance, a Deed of Variation is needed. This allows the IHT and CGT position to be “read back” to the point of death provided certain formalities are followed.

Note: anyone affected by Forfeiture Rules, meaning they cannot inherit, is not allowed to nominate an alternative recipient. The inheritance goes back into the estate and is distributed under the terms of the WIll or the Intestacy as if the intended recipient had died before the deceased person.

Deed of Variation: Common Situations

If the Will or Intestacy Rules don’t reflect the wishes of the person who has died, it is possible to vary and make sure that the people and amounts inherited are what he or she would have wanted.

This can be especially helpful in the following situations:

Where there is no Will and no legal spouse or civil partner but a long-standing partner who would otherwise not automatically inherit anything;

Where a Will fails to account and provide for children born after the date of the will;

Children who haven’t been formally adopted before the death and are not provided for within either the Will or under the intestacy rules;

Where a Will has been automatically revoked because of a marriage that has taken place after the date of the Will and so Intestacy Rules apply meaning that some people are not included as beneficiaries that might otherwise have benefitted;

Where someone who is due to benefit is financially secure and would prefer to see that money be transferred to someone else including the next generation/s who have a greater need for the money.

Where the intended Beneficiary has their own potential liability to IHT on their own death and wishes to avoid making lifetime gifts that might be added together with their other assets and gifts should they themselves die within 7 years.

Are there different rules to IHT in Scotland, Wales or Northern Ireland?

The rules regarding IHT are the same throughout the whole of the UK because most of the tax rules are not devolved, even though probate is dealt with differently in Scotland (slight difference in the allowance), where it is called ‘confirmation’ and probate in Northern Ireland. There are no differences between England and Wales in how probate is done.

What if the value of an inherited estate is below the Inheritance Tax threshold?

If you know, without any doubt, that the estate of the person who has died is significantly under the IHT threshold, we would still advise you to read through the rest of the information on this page in case other factors apply such as events during the lifetime of the person who has died.

Until the beginning of 2022, you still needed to complete an IHT 205 to prove to HMRC that no IHT needed to be paid. This form has now been abolished and you can just apply for the grant of probate/letters of administration.

Advantages & Disadvantages

Advantages

An advantage of making a Deed of Variation is that any changes to the inheritance are treated “as if” the Will or Intestacy had made such gifts rather than the individual would-be recipients themselves.

If the Will or Intestacy Rules don’t reflect the wishes of the person who has died, it is possible to vary and ensure that the people and amounts inherited are what he or she would have wanted.

Tax Advantages

It may be tax advantageous to make a Deed of Variation to maximise the availability of exemptions and reliefs by rewriting who inherits what and how.

It might be that someone inherits who simply does not want to benefit but would like to give away their inheritance, without it being seen or treated from a tax point of view as if they had made the gift.

By making a Deed of Variation to gift something to a charity might not only better reflect the wishes of the deceased person but also reduce the rate of IHT.

Disadvantages

A Deed of Variation can only be made once concerning the same assets and therefore if it is wrong then there is no going back to rewrite it and correct it. You can’t vary a Deed of Variation covering the same assets or property. Care needs to be taken to make sure it is absolutely correct the first time and written with absolute clarity. Any ambiguity could be a costly mistake.

If there are creditors you cannot make one to divert money away from creditors, which includes if someone is in receipt of means-tested benefits. Such people must inherit to then have means-tested benefits and all associated benefits and support withdrawn. This can be both confusing and upsetting when they have become dependent upon this assistance. This is made worse when a little later they may then have to reapply when the money runs out. Often these can be vulnerable individuals who might be traumatised or vulnerable to predatory behaviour or other forms of theft when they receive a large inheritance.

A Deed of Variation can’t be made on behalf of someone who lacks capacity. A court would need to be involved which is costly and time-consuming. Sometimes people must inherit in a situation where they might be likely to be subject to predatory behaviour from others or simply not have the ability to manage money and therefore unless they agree the inheritance could quickly be spent or fall into the “wrong hands”.

Deed of Variation Process

A Deed of Variation is a legal document that must be entered into properly. It can be made any time before or after the Grant has been issued or even when the estate does not have to go to probate.

Anyone who wishes to vary their entitlement can join in the same Deed of Variation if they want to, but this is not necessary. Sometimes it is not practical for every person wishing to redirect their entitlement, to be available to sign the same document. Sometimes beneficiaries don’t wish others who are inheriting under the Will/Intestacy to know what they are doing and sometimes they choose to appoint different advisors and want to prepare their own Deed of Variation independently.

It is possible to have more than one Deed of Variation provided each one varies a different part of the Estate. Each does not have to have any reference to any other Deed. It is always a good idea to get the Executors or Administrators (PRs)s to sign the deed so they know how to correctly administer the Estate. However, strictly they only need to sign along with the beneficiary changing their entitlement if the IHT position is changed by the Deed. From a practical point of view, it is much easier and less prone to cause mistakes in the administration of the Estate if all changes are included within one document and the PRs are included as parties to the Deed.

There are strict formalities and a limited time period to make a Deed of Variation. These must be followed.
Certain Elections need to be included to ensure any tax advantages are properly claimed. These are formal requirements to be included within the Deed of Variation itself. The parties to the Deed must make the Election “read back” to the date of death for IHT and CGT purposes using the correct wording and proper reference to the relevant sections of the law that apply. Without observing these formalities, the Deed cannot be properly read back and loses its tax advantages.

All parties to the Deed incorporating the Elections must sign, thereby agreeing to apply the law that enables reading back for IHT and CGT purposes.
Failure to observe all the formalities will mean the document is not fully effective and therefore a waste of time and effort. Proper advice should be taken when considering making one.

Deed of Variation FAQs

Are solicitors required to complete a Deed of Variation?

This is such an important document and could easily go wrong. A properly qualified solicitor or legal professional, preferably a specialist and someone with a STEP qualification that indicates they are an expert in this area of law, should be involved to make sure there are no unintended consequences of doing a Deed of Variation.

They will also make sure that you completely understand its effect.

How much does a Deed of Variation cost?

This depends on precisely what you want to do and also how quickly you need it done. If you are close to the 2-year deadline you may have to pay a premium for the Deed to be done very quickly even though it may not be overly complex simply because the solicitor will need to drop everything to make sure it is correctly drafted and properly signed off by all parties within the time frame which is strictly applied.

The solicitor will let you know what the likely cost is once you have decided what it is you want to do.

You might want to simply divert your gift to the next generation, and this might be quite straightforward and not overly expensive unless you leave it to the last minute to instruct the Deed to be prepared!

However, if you want to create complex Trusts or give to children and/or vulnerable people there may be a greater cost. The costs will reflect the complexity of the advice which might include that relating to ongoing duties and obligations for trustees regarding registration of trusts and their administration.

A solicitor must give you a realistic estimate of the likely cost once they know what you wish to achieve.

They will also make sure that you completely understand its effect.

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