Deed of variation guide

When someone dies and leaves a Will, it explains how they want their money, property and belongings to be shared.

However, sometimes, after the person has passed away, their loved ones might want to change their Will. Even though the person who made the Will had good intentions, the beneficiaries might feel that some things should go to other family members or friends.

If you want to change how a loved one’s estate is divided, you can use a document called a deed of variation.

What is a deed of variation?

A deed of variation, also known as a deed of family arrangement, is a legal document that allows beneficiaries to alter their entitlements under a Will. It also allows changes even if there isn’t a valid Will under the rules of intestacy.

Anyone who receives a gift in a Will can use it to give their inheritance to someone else, even if that person isn’t mentioned in the Will.

When creating a deed of variation, all changes must be agreed upon and signed by every beneficiary whose inheritance is impacted by the change, whether there’s a Will or not. If the changes are for inheritance tax or capital gains tax purposes, the deed of variation must be completed within two years of death. Executors should be party to the deed, especially if it will alter the tax position of the estate.

Reasons to change a Will after death

There are several reasons why you may want to make changes to a Will after death, including:

• Balancing inheritances: If one child received less than another, you might want to even things out.
• Including someone new: For example, if a grandparent left assets to the oldest grandchild but didn’t update the Will when another grandchild was born.
• Tax efficiency: Adjusting the estate distribution to reduce inheritance and capital gains taxes.
• Removing confusion: Making sure the Will is clear and easy to understand.

Reducing inheritance tax (IHT) charges

If you want to mitigate inheritance tax (IHT) charges, you might consider changing someone’s Will.

IHT is charged if someone's estate is worth more than the available 'nil rate band' when they die. This usually starts at £325,000. However, it could go up to £1.000,000 if they had a spouse or registered civil partner who died leaving everything to them and they are now leaving a property to their direct descendants. The amount up to the nil rate band is tax-free, but anything above that is usually taxed at 40%.

Changing a Will so that it skips a generation can help reduce future IHT burdens, while leaving money to charity in a Will can also lower the amount.

How to make a deed of variation

It’s a good idea to seek professional advice and a legal review when you create a deed of variation. By doing this, professionals can guide you through the process, ensuring you avoid unintended legal and tax consequences.

How much does a deed of variation cost?

There’s no fixed cost for a deed of variation – the price varies on a case-by-case basis. Here are some factors that can affect the price:

• Complexity: If the process involves complicated steps, like creating a complex trust, it can cost more.
• Solicitors: Hiring a solicitor will add legal fees to the cost. However, you may save considerably more money than if a deed of variation is incorrectly drafted.
• Timeframe: If you need a solicitor’s help close to the two-year tax deadline, they might charge extra if they must divert from other work.

How long does a deed of variation take?

Preparing a deed of variation can take somewhere between two and four weeks as long as all parties agree. However, the timeframe can be extended if:

• Any beneficiaries are minors.
• Any beneficiaries do not have mental capacity.

In these circumstances, a court application will likely be necessary, as they can’t legally sign a deed of variation.