Changing a will after a death doesn’t have to be a struggle. If all beneficiaries agree, a deed of variation (also known as an ‘instrument of variation’) can help you make the alterations you need to make without an epic legal battle.
So, what is a deed of variation on a will, and how do you go about making one? Here’s what you need to know.
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What is a deed of variation?
A deed of variation allows a beneficiary of a will to change what will happen to the portion of the estate left to them. Someone who inherits from a person who died ‘intestate’ (without a will) can also use one.
Most often, beneficiaries use deeds of variation to transfer all or some of their inheritance to someone else. Tax-wise, HMRC treats the gift as though it came from the original will, which means a deed of variation can sometimes help families tweak the inheritance tax due on the estate.
Why make a deed of variation for a will?
Some typical reasons you might consider making a deed of variation are:
- Giving some of your inheritance to someone who has been left out of the original will, such as a grandchild who wasn’t born when the will was made
- Giving some of your inheritance to someone who missed out due to the rules of intestacy, such as if your father died without a will and wasn’t married to your mother – she wouldn’t automatically inherit anything, so you might want to share some of your inheritance with her
- Tweaking the share of inheritance to reflect the finances of the different beneficiaries, e.g. if two siblings receive an equal share, but one doesn’t really need the money
- Passing your inheritance on to your children without having to make it part of your own estate
- Saving money on inheritance tax (more on that later)
- Resolving any issues caused by unclear wishes in the will
What’s the deed of variation time limit?
You can make the deed of variation after probate or before it. You just need to complete it within two years of the death of the person whose estate it is.
Who signs a deed of variation?
For a deed of variation to be valid, all the executors of the will, plus all the beneficiaries who technically ‘lose out’ due to the suggested change, need to sign it. It’s usually a good idea to get all beneficiaries affected (even positively) to sign just in case.
Remember: if the change suggested by the deed of variation impacts a beneficiary who’s under 18, or who’s not yet born, the deed isn’t usually valid. In cases like this, the deed needs the Court’s approval.
How can a deed of variation affect inheritance tax?
As mentioned, if you transfer your inheritance using a deed of variation for the will after a death, HMRC will treat the gift as though it came from the person who died. This can sometimes help you take advantage of the different kinds of tax relief available.
Now, the current inheritance tax threshold is £325,000. If the estate is worth more than that, 40% of the estate that’s beyond that threshold is due in inheritance tax.
But:
- Anything left to spouses or civil partners is exempt from IHT. So, you could use a deed of variation to split the estate between the spouse of the person who has died and their non-exempt beneficiaries in such a way that less inheritance tax is due.
- Anything left to charities is exempt, and can get you a lower IHT rate. Not only is money left to charities non-taxable, if at least 10% of the estate goes to charity, any IHT that is taken is charged at a lower rate of 36%. You’ll need to notify the charity that the variation is giving them a greater share and provide proof of that notification to HMRC for this to work.
- You can avoid paying inheritance tax on the same assets twice. Are you likely to leave your inheritance to your children in your will anyway? If that’s the case, it may be better to give it to them now using the deed of variation, rather than adding it to your own estate and risking more of it being taken in inheritance tax after your death.
Does a deed of variation need to be registered?
You don’t necessarily need to register a deed of variation to make it valid. This is because the signatures from all the different parties involved is usually enough to make it binding.
However, if the variation changes the tax due (for better or worse) you’ll need to send a copy of the deed to HMRC within six months of making it, and within two years of the person’s death, along with a filled out copy of the official HMRC checklist. This step is necessary if you want to benefit from any of the deed of variation tax implications mentioned above.
How to make a deed of variation
You don’t need to fill out any official paperwork to make a deed of variation. In fact, most variations to a will are simple letters. They do need to meet certain criteria, however, which you can find on the HMRC checklist here.
Changing a will does take some thought, and if you’re not clear on any of the points in the checklist of deed of variation rules it’s a good idea to get professional support from a probate specialist. You can call Beyond’s friendly team of advisors on 0800 054 9896.
How much does a deed of variation cost?
The cost of a deed of variation to a will depends a lot on the solicitor who provides it and how complicated the deed needs to be. That said, prices range from about £200 to £750.
Can a deed of variation be revoked?
If a deed of variation is made properly, you can’t usually revoke it. Also if you make another deed of variation later to try to change the destination of the same assets or inheritance, the transfer of assets will have the same tax status as if you gave the gift yourself, rather than it coming from the person who has died.
Make sure your will is up-to-date today
Making a deed of variation can be tough, because beneficiaries don’t always agree on what’s fair. So, to save your family the worry, it’s vitally important to keep your will up-to-date.
If you like, you can make a will online with Beyond, saving hundreds in legal fees along the way! It’s legally binding, takes just 10 minutes and our team of friendly legal experts are on hand to help every step of the way. Find out more here.