Deed of Variation of a Will or Intestacy

What is a Deed of Variation?

Definition of a deed of variation (also known as an instrument of variation):

A Deed of Variation can be used when someone dies and the results of their Will (or lack of it) mean that the deceased’s assets are not distributed to the best effect for the Part ofbeneficiaries as a whole.  Some times a badly written or out of date Last Will may accidentally exclude a child – a deed of variation can sort it out without expensive cCourt action or needless tax. The deed of variation effectively changes the Last Will or the effects of the intestacy and sets out the new terms of the Last Will or varies the standard rules of intestacy.

The deed of variation can only be made if all parties who would suffer loss have agreed to it – without compensation.  The need for agreement leads to complications where children are involved as beneficiaries.

To ask for a deed of variation or whether one is appropriate, click the link.

Examples of when a Deed of Variation might be useful:

Deed of Variation reason 1: Well off beneficiaries.

Well off? A deed of variation in time saves tax

Well off? A deed of variation in time saves tax!

The major beneficiaries (say the children of the deceased) are already well off and don’t need the money.  But their children or grandchildren are struggling with school or University fees, and could really use it.  If it is given to the children, who then pass it on, there is potential for an extra Inheritance Tax charge if the gift exceeds £325,000 or the child dies within seven years of passing on the inheritance.    A Deed of Variation can redirect the gift as if it had been left to the grandchildren (or whoever) in the first place.  This can remove the risk of needless Inheritance Tax in the right circumstances.

Deed of Variation reason 2:  No Asset Protection in Place.

It may be the right time to start protection – better late than never.   Many families lose everything when the survivor goes into care.   A Deed of Variation may help.

Deed of Variation reason 3: Intestacy – no valid Will.

When a husband or wife dies without a valid Will, or one can’t be found, only part of the assets may go to the surviving partner.   This may make life difficult for the survivor.  It also may needlessly use a proportion of the Transferable Nil Rate band of Inheritance Tax. Thus potentially creating a larger IHT bill on the second death. A Deed of Variation can potentially put things straight.

Deed of Variation reason 4: Beneficiary in Rocky Marriage.  

Probably the last thing you need when in this situation is a large inheritance.  It might precipitate a divorce with a big pot of cash suddenly on offer.  It has to be said that this would be better dealt with in the Last Will as (after death) there would be more scope to challenge it.  But worth a try to divert the cash into a Trust for the benefit of your child/ grandchild and their children – but not the spouse.  The trust can lend money to the original beneficiary, so they have the use of the inheritance, but it is a loan – from the Family Trust, not an asset.
A Deed of Variation can potentially save half or more of the inheritance.

Deed of Variation reason 5:  Spendthrift Beneficiary.   

If the beneficiary or his family are bad with money, they may agree that it would be best put into a trust.   The trust might buy them a property, for example.   But the Trust Fund and property could be managed by others, and money only paid out for sound purposes.
A Deed of Variation can preserve those assets, and maybe even pass them down further generations – rather than see it frittered away.

Deed of Variation reason 6:  Unstable Beneficiaries.        

Sadly, rather common.    Drugs, alcohol and mental problems are suffered by a surprisingly large proportion of the population.  Often the problems are temporary but better safe than sorry. See comments above too.

Deed of Variation reason 7: MAD

Marriage after death is increasingly common.  The surviving partner is lonely and eventually meets and moves in with or marries a new partner who ends up inheriting everything.  The children, grandchildren etc are left with nothing.  It may well be too late after the second death, but sensible precautions can readily be put in place on the first death by way of deed of variation creating a trust.  Ideally this should be done before either partner dies as creating a trust (typically of your house) in good time has tremendous advantages.   Contact us for more information.

Deed of Variation of a Will