Deed of variation for a will

A deed of variation allows beneficiaries of a deceased person's estate to change the way the assets are distributed. This can be done by reducing or transferring their own entitlement to another beneficiary, including someone not originally left money or assets in the will. The same principles apply where no will is left and you are inheriting under the intestacy rules.

Another term often used for beneficiaries varying entitlements 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. If you want more information on changing a will after death, contact us today.

Do all beneficiaries have to agree a deed of variation of will?

Yes, all beneficiaries affected by a Deed of Variation must agree to the changes.

For the variation to be valid, all affected beneficiaries must sign the document. This is because the variation changes the original will and affects the rights of all involved parties.

If a beneficiary refuses to sign, the Deed of Variation cannot be implemented, and the original will will stand. It's important to ensure that all beneficiaries understand the implications of the variation and agree to it willingly.

Reasons to vary a will post death

There are 5 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.

• For Inheritance Tax reasons - Consulting with a qualified tax advisor or solicitor is essential. The executor must inform HMRC about the Deed of Variation to ensure accurate tax calculations.

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.

Legal formalities

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.