Deed of variation for a will
Thu 12 October 2023
A deed of variation is a legal document that allows beneficiaries of a deceased person's estate to change the way the assets are distributed. This can be done by giving up or transferring their own entitlement to another beneficiary, or by adding someone new to the will. Another term often used for beneficiaries varying a will after death is a deed of family arrangement.
If you are considering a Deed of Variation for an estate you are involved in, we strongly suggest that you seek independent legal advice, as the implications can be significant. A simple Deed of Variation starts from £400 plus VAT and can be drawn up within a couple of weeks. If you want more information on changing a will after death, contact us today.
Reasons to vary a will post death
There are 4 main reasons in our experience :-
- Where the beneficiary decides that he or she does not need money or some of the money left to him or her and wants to instead divert the legacy to someone else - the alternative beneficiary doesn’t have to be a beneficiary in the Will already. In some cases, all the beneficiaries or more than 1 may decide to also vary their entitlements but this is not a prerequisite.
- To avoid family friction going forward – especially if some close family members do not get left equal amounts in the will
- To put the original gift into trust – the primary reasons for doing this are usually tax. There can be implications for Capital Gains Tax (CGT) Income Tax and Inheritance Tax in the future.
- Where some or all of the gift is shares in a family owned business - a Deed of Variation may be used to restructure the deceased's estate to potentially qualify for Business Property Relief (BPR), which provides a tax exemption on certain business assets, including property used for a business. By using a Deed of Variation, beneficiaries can look to ensure their inheritance qualifies for BPR.
Are there any alternatives?
There are often quite specific reasons, including those we detail above for a deed to be needed. There are other possible alternatives including :-
- Disclaiming your entitlement – this does mean completely disclaiming your entitlement and also not being able to decide who will benefit in your place.
- Gift away your entitlement – this will constitute, for Inheritance Tax (IHT) a Lifetime gift. If you survive for at least 7 years after making the gift it becomes fully inheritance tax free.
To be legally valid the deed of variation must be in place within 2 years of the death and will need to comply with the Inheritance Tax Act 1984 and the Taxation of Chargeable Gains Act 1992. Key points include requirements that :-
- The deed must clearly set out the variations.
- The deed must be signed by any of the beneficiaries who are losing some of their entitlement.
- The deed must be signed by the executors if the variation will increase liability for Inheritance tax.
- The deed must be signed by executors if the Variation increases the Inheritance Tax payable.