Deed of Variation Explained

26 March 2018

What is a Deed of Variation?

After someone dies, it is possible for the beneficiaries of their estate to make changes to the distribution of the estate, instead of directly following the terms of the will or the rules of intestacy. This can be done using a Deed of Variation, also known as an Instrument of Variation.

Changing the distribution of an estate

After someone dies, their affairs need to be wound up and everything they own distributed to those entitled to inherit (the beneficiaries). The way in which the estate should be distributed will be either set out in the terms of the will, or if there is no will it will be determined by the rules of intestacy.

There may be circumstances following a death where the beneficiaries in the will or those entitled to inherit under the rules of intestacy wish to change the way in which the estate is distributed. This would mean that the distribution of the estate no longer aligns with the terms of the will or the rules of intestacy.

There are several reasons why you may want to change the distribution of an estate. These include but are not limited to:

  1. Making the distribution equal between the beneficiaries
  2. Providing for someone who was not included in the will, such as a grandchild who was born after the will was made
  3. Providing for someone who the rules of intestacy do not apply to, such as a partner or step-child
  4. Tidying up any uncertainty in the will
  5. Inheritance Tax planning reasons, such as including a charity as a beneficiary to reduce the amount of Inheritance Tax that needs to be paid by the estate.

How a Deed of Variation can save time and money during probate

There are a number of ways to save time and money during probate by using a Deed of Variation. Some beneficiaries will use this to redirect their inheritance directly to their children, so that the inheritance skips a generation and is only liable for Inheritance Tax once.

A Deed of Variation can also be used to change the way the estate is divided and potentially save Inheritance Tax in that way. This might include donating a certain proportion to charity, for example.

How a Deed of Variation works

A Deed of Variation can be used by a beneficiary of the estate who wants to alter or redirect their inheritance entitlement. They can choose to redirect their share to anyone they wish, regardless of whether or not that person has been included in the deceased’s will or is recognised under the rules of intestacy.

There are circumstances in which all of the beneficiaries would need to agree to a Deed of Variation. For example, it may be that the will leaves the entire estate to be divided equally between three children, but there are four children of the deceased. As such, the children may wish to divide the entire estate between the four of them. In order to do this, the three children who have been named in the will would all need to be in agreement, as the change will affect how much each of them inherits. If only two of the children agree then they can only alter the share of the estate that they are entitled to.

Therefore if the entire estate that is to be distributed is worth £200,000 and the three children agree then each of the four children would be entitled to £50,000 each. If only two of the children agreed then the one child who does not agree would receive £66,666 and the two who agreed to vary the distribution would each received £44,444, together with the fourth child.

If the Deed of Variation would affect a beneficiary who is under 18, then it’s not possible to do this, as a minor cannot legally agree to a Deed of Variation.

A Deed of Variation can be prepared before or after obtaining the grant of probate but it must take place within two years of the date of death of the deceased.

HM Revenue & Customs (HMRC) have a useful instrument of variation checklist, which can be used to check that any changes made will meet all legal requirements. It is also important to remember to make a will and keep this updated during your lifetime.

If you are unsure about using a Deed of Variation to change the terms of the will or the intestacy position, it is worth seeking advice from a probate specialist to discuss your options and any implications on your own estate and affairs.

By Probate Lawyer Jessica Llewellyn

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