In this article
Has a loved one been cut out of a will, or perhaps you want to reduce inheritance tax (IHT) and capital gains tax (CGT)? If so, a deed of variation may be beneficial for you. In this article, our solicitors outline everything you need to know.
For more information, please visit our wills and probate page. Furthermore, if you want to contact a solicitor today, please call us directly on 020 3007 5500.
What is a deed of variation?
In short, a deed of variation is a document that changes how assets are distributed in someone’s will (or the intestacy rules when there’s no will) after they have died. The only people who have the power to produce this document are those who stand to inherit (the “beneficiaries).
A deed of variation varies on a case by case basis. In some cases, a beneficiary may use it to determine how part of the estate is left. However, in other circumstances, it may relate to the entirety of the estate.
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How does a deed of variation work?
The document, once executed, allows the beneficiary to redirect some or all of their interest in the estate elsewhere. People usually divert their interest in an estate to another individual, a charity or trust. Most commonly, a deed of variation creates a gift from the original beneficiary to the new beneficiary. While this document may seem helpful, there can be unforeseen tax consequences if not handled correctly.
Remember...
If you’re considering a deed of variation, it’s essential to contact one of our wills and probate solicitors first. Instructing a solicitor will ensure you don’t make avoidable yet costly mistakes. To contact one of our solicitors, please call us on 020 3007 5500.
Why use a deed of variation?
There are several reasons why a beneficiary would like to redirect a gift from an estate. The underlying reason why beneficiaries divert their inheritance is to provide for others who have greater financial needs.
Some of the main reasons people want to use a deed of variation include:
- Including someone as a beneficiary. A beneficiary may use a deed of variation to add a beneficiary. A typical example is the deceased leaving someone out of the will. Therefore, it allows that person to inherit from the estate.
- Charitable giving. In some circumstances, a beneficiary may decide to defer part, or all, of their inheritance to charity.
- Tax benefits. In some circumstances, beneficiaries may find more tax-efficient ways to distribute an estate to lessen IHT and CGT.
- Divorce. Suppose someone is considering divorce. In that case, that person may decide to use this document to prevent their inheritance from being brought into the financial settlement.
- Intestacy. If the deceased didn’t have a valid will, the contents of their estate would pass through the intestacy rules. The intestacy rules only allow the contents of the estate to be inherited by the person’s spouse, civil partner, and a few other relatives. Therefore, under these rules unmarried partners, step-children, close friends, and others won’t inherit.
Remember...
If you need legal advice, please contact one of our wills and probate solicitors on 020 3007 5500.
Does a deed of variation need to be registered?
A deed of variation does not need to be registered with any third parties. Furthermore, for the document to be legally binding, the following people must sign the document (as long as they’re over the age of 18):
- Beneficiaries of the will
- Anyone affected by the changes
- New inheritors
Following these signatures, the executor (person managing the person’s estate) will need to agree to the changes before a deed of variation becomes legally binding.
How long does a deed of variation take?
If the process is relatively straightforward, a deed of variation should not take more than a couple of weeks. However, when someone makes this document, all beneficiaries must agree to the changes. Therefore, in some cases, there may be disagreements over the changes. In these circumstances, it can take longer as a negotiation between beneficiaries is needed.
If you need help with negotiation, our solicitors can help you reach an agreement efficiently. To contact our solicitors, please call us on 020 3007 5500.
Need help with a deed of variation?
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How much does a deed of variation cost?
In its simplest form, a deed of variation is likely to cost in the region of £1,000 + VAT to £1,250 + VAT in legal fees to put in place. Suppose further negotiation is needed or there are family disputes relating to the estate. In that case, fees are likely to be higher.
Can a deed of variation be revoked?
Once you make a deed of variation, you can’t revoke it. Therefore, if you’re looking to make a deed of variation, you must ensure it’s correct to avoid costly future consequences, such as heightened IHT.
Are there any alternatives to a deed of variation?
Before deciding whether a deed of variation is the right decision for you, it’s important to acknowledge any alternatives. Two of the main alternatives to a deed of variation include:
- Disclaim their interest. When someone disclaims interest in an estate, they give up the entirety of their interest in the estate. However, one of the biggest considerations when someone disclaims a gift is that they lose control over their gift and who receives the gift in their place.
- Lifetime gift. Alternatively, the original beneficiary can make a lifetime gift to the new beneficiary after administrating the estate. A lifetime gift is only an option when the original beneficiary is confident that they’re going to live for at least another seven years. When someone makes a lifetime gift and passes away before seven years, there will likely be IHT consequences.
Why contact our solicitors?
Strictly speaking, you do not need a solicitor to draw up a deed of variation. However, using a solicitor can ensure avoid any potential problems in the future. In any case, our solicitors will always require an initial consultation first. In this consultation, you will get:
- Unlimited time to discuss your matter and ask any questions you may have.
- A clear overview of your legal standpoint and your available options.
- Simple inheritance tax advice.
- An upfront time and fee estimate.
To contact one of our solicitors to arrange your consultation, please get in touch with us on 020 3007 5500.
Re: Deed of Variation in a Will
“the following people must sign the document (as long as they’re over the age of 18):
Beneficiaries of the will ”
My understanding from the Governments own website under checklist is quote “The variation must be signed by all the people who would lose out because of it.” ie not all the other beneficiaries whose inheritance is not affected.
Please clarify.
Many thanks
Roy
Dear Roy, thank you very much for your comment and apologies for our late reply, but we hope this information is still useful for you.
Whilst you are right that, strictly, only the beneficiaries whose inheritance will be affected by the variation must sign the deed, if there is no animosity and all the beneficiaries are in agreement, then all should be encouraged to sign the deed. This will help to mitigate the risk of dissatisfied or upset beneficiaries arguing against the variation, challenging its validity, or challenging the executors’ decision to agree to the variation.
If only one of the beneficiaries wishes to change their inheritance and seeks to do so by a Deed of Variation and then a Trust to cater for the new/altered beneficiaries then who pays the several thousand pounds costs, the whole Estate or the single beneficiary seeking the changes? And can the Executor advance the costs from their allocated inheritance before the whole Estate is settled?
once a deed of variation is entered into do the funds have to be transferred straight away to the “new” beneficiaries or can the grantor of the deed hold on to the funds until they deem fit to distribute ?
Dear Chris
Thank you very much for your question. It is most common for a deed of variation to be agreed upon and signed prior to distribution of the estate by the trustees so it will be highly unlikely that the “old beneficiary” will be in receipt of funds before they are redirected.
In the rare situation where the deed of variation is made following distribution of the estate, the old beneficiary should transfer funds to the new beneficiary or beneficiaries as soon as possible to prevent them being considered a trustee.
We hope this information helps you!
Is there a time limit to making a Deed of Variation?
Thank you very much for your question, James.
A deed of variation can be made any time after someone passes away. However, in order to receive retrospective inheritance tax and capital gains tax treatment for the new disposition, it must be made within 2 years of the date of death.
The retrospective treatment means that if the new disposition creates a more tax efficient situation (for example, to take advantage of the spousal exemption for inheritance tax) then it can be written back to affect the tax position of the estate on death.
I hope that helps you with your question. Should you like to discuss this further, please just call us on 020 3007 5500 to arrange an initial consultation.
My partner and I lived together almost 40 years but he never bothered getting divorced. He completed will instructions naming me as sole beneficiary. He died an hour after signing the papers and his GP signed he had mental capacity as he was there completing RESPECT forms. I’m in touch regularly with his son and his ‘ex wife’ doesn’t want anything. He has very little money at the moment (only a few weeks of DWP payments due) but once we have a cause of death he MAY be entitled to a final offer payment for asbestosis. This could be significant. Should we look at doing a deed of variation?
My Dad has just died and left money to my sister and l. Awaiting probate. My sister has severe Alzheimer’s and incapable of signing anything. Is there anyway the money could go to her daughters instead. eg Deed of variation.
Her husband is in favour.
My Mother in law has just past away and her money is in trust to my father in law. We are looking to do a deed of variation, but what happens to her RNIB allowance regarding the house?
What happens if a deed of variation is not completed within 2yrs in the UK?
My mother is entitled to inherit her estranged brother’s £80k estate, as he died intestate and she is the only next of kin. She does not want any of it at all. She would like to take out a deed of variation that allows it to go to me and my brother equally. Would that money go into her account at any point, or does it go automatically to those indicated on the deed of variation? My brother is his uncle’s executor and is currently holding the funds. He is unclear as to what he is legally allowed to do. Would the deed of variation allow him to simply give the money to himself and myself, or does he need to give it to my mother and she then gives it back to us? She does not want to touch any of it in any way, if possible.
We have completed our own Deed of Variation, within the 2 year timescale, which has now passed.
However, the gift is the deceased’s residential property left to my wife, and this has already been registered with The Land Registry. The DOV has varied ownership to our sons.
Are we too late to change ownership at The Land Registry in favour of our children ?
Hello David, thank you for your question. A member of our team will reach out to you via email to speak to you directly about your situation.
Hi the house of my uncle was going to be left to my step cousin but had to be sold to pay a care home.
She’s no longer in the will.
She’s made a deed of variation to get the money from the rest of the beneficiaries.
Her 3 kids have agreed and also 3 step cousins.
5 other step cousins do not agree.
Can the 5 that do not agree still get their full amount?
Hello Joy,
Thank you for your question. To ensure that our solicitors provide the correct advice, it’s best that you speak to them directly regarding your matter. A member of our team will contact you about booking a consultation.