There are certain circumstances in which you may want to change the details of an inheritance after the death of a loved one. Although Wills cannot be altered themselves after the testator has died, it is possible as a beneficiary to sign a Deed of Variation in order to redirect part or all of an inheritance.
At The Law House, we are experts in all aspects of inheritance law and can guide you through your options.
On this page, we provide a Deed of Variation definition and answer some commonly asked questions about this legal process.
What is a Deed of Variation?
Deeds of Variation (previously known as Deeds of Family Arrangement) allow a beneficiary who is awarded part or all of a Will or intestacy to change the way in which inherited assets are owned.
They are most commonly used by beneficiaries to re-direct a gift for the benefit of another person without the money being taxed twice.
The main effect of these deeds is that the gift, whether it is money, property or another asset, is deemed to have been made by the individual who died rather than by the person who has relinquished their entitlement under the terms of the Will.
This applies for all inheritance tax purposes and for some capital gains tax purposes, but it does not apply in any other respect.
It’s important to be aware that variations cannot be made if anyone who is likely to be impacted by the changes does not consent to them or if the beneficiary is under the age of 18. In cases like these, you would need to get the consent of the court, and this may prove difficult.
Deeds of Variation can be made even if there is no Will in place and an estate has been divided in line with the rules of intestacy. Again, the important thing in these cases is that all beneficiaries as determined by the intestacy rules agree to the new distribution of assets.
What are the Benefits of Redirecting Assets?
There are a number of reasons why people sometimes want to redirect assets held in a deceased individual’s estate. They include the following:
- To reduce inheritance tax
By varying an original Will, a beneficiary might renounce their share and redirect it to another party (such as their children or a charity). In turn, this could save the extra taxation that may be applied if they passed away and left the share to these beneficiaries in their own Will
- To alter the interests under a Will
For example, this could mean enlarging a life interest to an absolute or outright interest
- To provide for someone who has been omitted from a Will
A Deed of variation can also be made to rectify a situation in which someone has been left out of or insufficiently provided for in a Will
- To resolve uncertainty or address a defect in a Will
- To redirect the deceased’s share of a jointly owned asset
where it would otherwise pass to the surviving joint tenant
Can a Deed of Variation be made after probate?
You can use a Deed of Variation at any time. This applies before or after the Grant of Representation, or Grant of Probate, is issued.
Note that these deeds can be made even if the deceased’s assets have already been distributed. However, in order to meet the requirements to save capital gains tax or inheritance tax, they must be completed within 24 months of the date of death.
If you have any questions concerning the relationship between Deeds of Variation and probate, don’t hesitate to get in touch with our team.
To meet the requirements needed to save tax, the following criteria must also be met:
- Accurate tax declarations have to be included in the deed.
- No financial inducements (including cash payments) can be given to beneficiaries to sign the deed.
- The destination of assets can’t be varied more than once in separate deeds.
- The paperwork has to be signed by all the beneficiaries and executors.
Do I need to register a Deed of Variation?
There is no requirement to register these deeds because they are essentially detailing an agreement that has been made between all the relevant parties. Simply signing it ensures it is legally binding.
What is a Disclaimer?
If you are looking for an alternative to a Deed of Variation, you may wish to consider a Disclaimer. This is a simple deed that allows you to give up all rights to an inheritance.
To be valid, it must be made prior to the acceptance of any income or other benefit from the deceased person’s estate.
However, it is important to be aware that unlike with a Deed of Variation, you have no control over who receives the asset if you sign a Disclaimer. Once these documents are effected, the inheritance passes on in accordance with the fixed rules of the law, meaning the next person entitled under the terms of the Will or on intestacy Will receive the inheritance.
In addition, the law relating to Disclaimers is obscure and technical. For these reasons, it is usually preferable to opt for a Deed of Variation.
How can I make a deed of variation?
At The Law House, we have an experienced team of dedicated Wills lawyers who can provide all the advice and guidance you need on the above processes.
We take the uncertainty out of the procedures and ensure you achieve the results you are looking for.
For more information or to arrange a confidential initial discussion, don’t hesitate to get in touch on 020 3150 2525.