Deed of Variation for a Will: What is a Deed of Variation?.

A common misconception is that once an individual receives inheritance either under a will or under an intestacy (if the deceased did not leave a will), they cannot redirect this inheritance.

This is not the case, you can enter into a deed of variation.

A deed of variation is a legal document which allows the beneficiaries of the estate to alter the distribution of the estate as expressed in the deceased’s will or as determined by the intestacy provisions.

What changes can be made by using one?

A deed of variation can be used to redirect all or part of your inheritance, and can even be used to create a trust in some circumstances.

It is important to note everyone who is impacted by the deed of variation must be a party to it. If you are the only beneficiary impacted, then the other beneficiaries do not necessarily need to be involved. However, if any other beneficiaries would be affected by the proposed variation, then they would also need to sign.

If the deed of variation is going to change the inheritance tax position of the estate, then the personal representatives of the estate must also be party to the deed.

Advantages and Considerations

Formalities

A deed of variation must be entered into within two years of the testator’s death and must be in writing. The deed must also explain what changes the beneficiary wishes to make and must be signed by all of the beneficiaries who are affected.

Inheritance Tax

A deed of variation can be beneficial for inheritance tax purposes and allow an estate to take advantage of available exemptions and reliefs. A deed of variation can also allow the opportunity for lifetime planning for a surviving spouse or child, as they can redirect assets they may not need in order to reduce the size of their estate, without the requirement to survive seven years (which would be the case if they made an outright gift).

However, you should always take professional advice before entering into a deed of variation, as the circumstances may mean that a variation would trigger a greater inheritance tax liability than there would otherwise have been under the will or intestacy, which is generally not desirable.

Deprivation of Assets

When entering into deed of variation, you must also be mindful of rules on deprivation of assets. A surviving spouse, for example, may be seen to be deliberately redirecting assets out of their estate so they do not have to pay care home fees in the future by executing a deed of variation. If this is the case, the local authority have the power to reverse the variation and determine the individual in question should be funding their own care.

In summary, it is important to seek professional advice before entering into a deed of variation as you do not want to create unintended problems for yourself and the personal representatives of the estate.