Deed of Variation

Changing a will after death

What is a Deed of Variation?

A Deed of Variation can also be referred to as an Instrument of Variation, a Family Arrangement, a Deed of Surrender, or a Deed of Assignment. It enables beneficiaries of a deceased’s estate to alter the distribution on of that estate, or relinquish a bequest from an estate by changing the deceased’s Will.

How can A Deed of Variation be used?

The use of such a deed allow the beneficiaries of a deceased’s estate to rewrite the distribution of the estate so that it passes on in the most Inheritance Tax efficient way and to minimise Capital Gains Tax (GCT) liability. They can also be used to pass the estate to a different beneficiary.

A Deed of Variation can be drawn up to two years after the date of death. Making a Discretionary Trust and skipping a generation are both ways in which Deeds of Variations can be used to alter the will of a deceased to reduce Inheritance Tax liability.

In order to establish a Deed of Variation all the beneficiaries of the will must be in agreement. When children are involved the matter is further complicated as they cannot themselves consent to changes. An application must be made to the courts for consent to be obtained on their behalf.

Why Use a Deed of Variation?

There are many reasons why it may be desirable to amend the will of a deceased or indeed an Intestacy, for example, to balance the differences in the finances of the beneficiaries (perhaps from a wealthy sibling to a poorer one), or to pass the inheritance on to the next generation rather than swelling the estates, which will be taxable, of wealthy parents to struggling grandchildren.

Can a Deed of Variation be Relied on?

Most people would like to deal with the issue of Inheritance Tax Planning and not return to the issue, confident that they have found the most efficient way to deal with their estate. Unfortunately, although extremely useful, a Deed of Variation should not be relied upon as part of an individuals estate planning. It may be that the effectiveness is reduced by the Government in the future. At present, however, they do offer an effective way of changing a will after death.

When Can a Deed of Variation be Used?

A Deed of Variation can only be used if:

  • everyone adversely affected agrees
  • there is no reciprocation – no one is compensated for what they give up
  • none of the assets are affected by a Gift With Reservation
  • if the variation affects the rights of children or unborn children, Court approval will be needed

nb. Although a Deed of Variation is treated as a rewriting of the will for purposes of Inheritance Tax, for all other tax purposes it is treated as a gift of inheritance.