What Is a Deed of Variation of a Will?

A Deed of Variation is a legal document that allows beneficiaries to alter the distribution of a deceased person’s estate under a Will or the rules of intestacy, provided it is completed within two years of the Testator’s death.

A Deed of Variation can be used to:

• Redirect all or part of an inheritance to another person.
• Improve inheritance tax or capital gains tax efficiency.
• Include someone who was left out of a Will.
• Create a gift the Testator intended to make but did not update in their Will.
• Help resolve disputes between beneficiaries without going to court.

Whether you are considering a Deed of Variation for tax planning or family reasons, it is important to understand how they work and the legal requirements involved.

Why Is a Deed of Variation Used?

A Deed of Variation is most commonly used for reasons of tax efficiency.

There can be inheritance tax (IHT) and/or capital gains tax (CGT) advantages to gifting by Deed of Variation rather than the original beneficiary making an informal gift after they have inherited.

For example:

• A Deed of Variation can maximise spousal or charitable exemptions, helping to reduce inheritance tax on the deceased’s estate.
• A beneficiary may choose to redirect all or part of their inheritance to their own children, reducing potential inheritance tax on their own estate in the future.

This is because a gift made by Deed of Variation is generally treated as though it came directly from the Testator, rather than from the original beneficiary. As a result, the original beneficiary does not have to survive the usual seven-year period that normally applies to lifetime gifts for inheritance tax purposes.

Other Reasons for Using a Deed of Variation

A Deed of Variation can also be used for reasons other than tax planning.

For example:

• Creating a new gift that the Testator intended to make but did not update in their Will.
• Including a family member or dependant who was left out of the Will.
• Settling disagreements or disputes between beneficiaries regarding the division of assets without the need for court proceedings.

What Conditions Must Be Met?

There are a number of legal requirements that must be met when preparing a Deed of Variation, which is why we recommend seeking professional legal advice.

These include:

• The Deed must be signed and dated within two years of the Testator’s death.
• The gift or redirection should not take place before the Deed has been completed.
• It must be signed by everyone whose entitlement is adversely affected.
• It must clearly identify the inheritance being varied and explain how it is being changed.
• If stocks, shares or marketable securities are being redirected, a Stamp Duty exemption certificate may be required.
• It should include the appropriate statement confirming that the variation is intended to take effect for Inheritance Tax and/or Capital Gains Tax purposes.
• The person redirecting their inheritance must not retain any benefit from the assets being redirected.
• Assets can only be varied once.
• There must be no consideration given for the Deed, and no assets brought into the estate to compensate the original beneficiary.
• If the variation results in additional inheritance tax becoming payable, the Executors or Administrators must also sign the Deed. The Deed must then be submitted to HMRC, and any additional inheritance tax and applicable interest or penalties may also become payable.

Frequently Asked

What is a Deed of Variation?

A Deed of Variation is a legal document that allows beneficiaries to change how a deceased person’s estate is distributed after their death. It can be used to redirect an inheritance under a Will or the rules of intestacy, provided it is completed within two years of the Testator’s death. If you are considering a Deed of Variation, the Wills and Probate team at Thorneycroft Solicitors can advise on whether it is appropriate for your circumstances.

Why would someone need a Deed of Variation?

A Deed of Variation may be used to improve inheritance tax efficiency, redirect an inheritance to another beneficiary, include someone who was unintentionally left out of a Will or help resolve disputes between beneficiaries. Every estate is different, and Thorneycroft Solicitors can advise whether a Deed of Variation is the most suitable option for your situation.

Can a Deed of Variation reduce inheritance tax?

Yes, in some circumstances. A Deed of Variation can reduce inheritance tax by redirecting assets in a more tax-efficient way, depending on the circumstances of the estate and its beneficiaries. As the tax implications can be complex, Thorneycroft Solicitors can provide tailored legal advice to help you achieve the intended outcome.

Do I need a solicitor to prepare a Deed of Variation?

No, but it is strongly recommended. A Deed of Variation must satisfy a number of legal and tax requirements, and mistakes can affect its validity or any intended tax benefits. Thorneycroft Solicitors can prepare your Deed of Variation and ensure it complies with the relevant legal requirements.

How long do I have to complete a Deed of Variation?

A Deed of Variation must normally be signed within two years of the Testator’s death. To qualify for inheritance tax or capital gains tax treatment, it must also meet the relevant legal requirements. If you’re unsure whether you are still within the time limit, Thorneycroft Solicitors can advise you on your options.

Do I Need Legal Advice?

A Deed of Variation can have significant legal and tax implications. Obtaining professional advice helps ensure the document is prepared correctly, satisfies the relevant legal requirements and achieves the intended outcome.

If you are considering having a Deed of Variation drafted and would like legal assistance, our Wills and Probate team at Thorneycroft Solicitors will be happy to assist.

Contact us today on 01625 503444 or email [email protected].

Written by Julie Foundation, Legal Executive in our Wills and Probate team.