What is a Deed of Variation and Why Should I Use One?

What is a Deed of Variation and Why Should I Use One?

We are often contacted by Beneficiaries following the death of a loved one who would like to change the terms of the Will in which they are named.  It is not possible to change a Will after the death of the Testator, as ultimately, the Will was their way of stating their intentions and wishes.  It is possible, however, where a named Beneficiary wishes to receive less than they were originally supposed to inherit and they would like the remaining portion to go to someone else.

By entering into a Deed of Variation, it is possible for a Beneficiary to define how they want to share their portion of the inherited estate among other Beneficiaries. it is not possible, however, to include the direct inheritance of another Beneficiary in the Deed of Variation.

Why would a Will Beneficiary want to enter into a Deed of Variation?

Not all Will Beneficiaries will enter into a Deed of Variation, but you may want to if:

• You would like someone else to benefit from the estate who was not included (e.g. grandchildren or other family members who were born after the Will was originally drafted (assuming the Will was not changed to include them)

• You want to set up a Trust and have part of your inheritance go directly into the legal entity from the estate

• You don’t need all of the inheritance

• Rather than you receiving all of your inheritance then passing some to a charity, you may want some to go directly to a charity of your choosing

• You want to ensure that all Beneficiaries receive a more even share of the deceased’s estate

• The amount being received would lead to inheritance tax being owed.  You may choose to give 10% or more of the net estate to charity to benefit from the lower 36% rate of inheritance tax

• You are aware that the Testator wanted to include someone else in their Will, but they did not get the chance to make the necessary amendment

• You may want to use the deceased’s inheritance tax ‘nil-rate band’ by creating a trust or making a gift of the value of the nil-rate band

If you decide to enter into a Deed of Variation in respect of your portion of an inheritance, you can choose how it is distributed.  You may choose to split your inheritance among one or more other people, or you may give the whole inheritance to another person, charity, or Trust.

What is contained in a Deed of Variation document?

A Deed of Variation is a legal document that should be drafted by a Solicitor specialising in Wills and probate.  The document will contain the following information:

• The details of who died 

• A summary of the contents of the Will of the deceased, including their estate and assets

• What the person entering into the Deed of Variation is entitled to in the Will (i.e. certain assets and/or money) – this includes if they are to receive a share of the deceased’s residuary estate

• The variation the Beneficiary wishes to make, including:

• The item to which they are entitled in the Will

• How much of the item will be given to a new Beneficiary or Trustee

The document also makes it clear that from a legal perspective, the new Beneficiary is treated as having been the absolute owner of the particular assets named from the date of the deceased’s death and that they are liable for any inheritance tax for the portion they will receive.  The purpose of this is to make it clear that the money will not be passed from the main Beneficiary to the new Beneficiary; it will go directly from the estate to the new Beneficiary.  

The Deed of Variation must also have the signature, name, occupation, and address of the current Beneficiary, any new Beneficiary, and the Executor/s.  This last stage is crucial as for a Deed of Variation to be legally valid, there must be an agreement of both the person giving away part of their inheritance and those receiving it.  The Executor must also agree because the Deed of Variation may alter any inheritance taxes owing.