It’s easy to think that a deceased person’s will cannot be changed in any way, but it’s not quite that simple.
The deed of variation is an agreement of changes to a will that can be made by beneficiaries, altering the distribution of their part of an estate.
So how does it work, and what are the pros and cons?
What is dead of variation?
A deed of variation is a form of legal document. It gives you the power to change the terms of an existing will or trust to redistribute assets and add new beneficiaries.
To be legally binding, a deed of variation must be signed by all involved parties and witnessed.
A deed of variation can be used to reduce your inheritance tax liability by transferring some of your entitlement to another beneficiary, but always seek expert advice before making changes that might have tax implications.
How does a deed of variation work?
A deed of variation works by allowing you to change your share of an inheritance.
It doesn’t have to be drafted by a solicitor, but you should certainly consult one while putting your document together.
Here are some key changes you can make:
Redirect specific assets to different beneficiaries
Give away all of your entitlement
Set up a trust
The person who benefits from your entitlement needn’t be named in the original will.
The changes you can’t make using a deed of variation include:
Changing other people’s inheritance without their consent
Giving yourself a larger share of the estate – unless it’s being gifted to you by another beneficiary
Changing executors or guardians named in the will
How much does a deed of variation cost?
There’s no such thing as a fixed price deed of variation, because each case will be individual.
There is a strict two-year deadline on completing a deed, and if you’re getting close to this, your solicitor may charge a premium for diverting from other work.
The complexity of your intended changes will also make an impact.
Your solicitor will give you a good idea of likely costs once you’ve outlined what you need to do.
How long does a deed of variation take?
It usually takes between two and four weeks to prepare the deed – as long as all parties agree.
If some beneficiaries are minors or do not have capacity, you’ll need to make an application to the court, which will take longer.
What about deed of variation and property?
In the property sector, a deed of variation is used to alter the terms of a leasehold agreement.
There are numerous ways in which a deed of variation can be used in this area, and a conveyancing solicitor will be able to guide you through the possibilities and restrictions.
One important point is that you must register a deed of variation with the Land Registry, because you’re seeking to alter the terms of a lease, so all associated documents must be accessible to everyone concerned.
What are the tax implications?
If you choose not to benefit from an inheritance, but would like to give it away without this being seen as a taxable gift, the variation will make it possible.
It must be made within two years of the date of the person’s death. You can also make a gift to a charity, which will also reduce the rate of inheritance tax [IHT].
HMRC only need to be informed about a variation if it means that more tax will be payable. If the tax liability has been reduced, there’s no need.
The deed of variation can be a really useful tool – particularly if it makes sense to transfer entitlement to other beneficiaries among your family and friends.
Just make sure you get the support of an experienced solicitor before you get started.