What Is a Deed of Variation?
A deed of variation is a legal document that lets you change the way an estate is divided after someone has died. This can be useful if the will doesn’t align with current wishes or there are no provisions for certain family members.
You have to meet some key conditions for this document to be valid. A deed of variation must be done within two years of the person’s death, during which you can use this opportunity to amend the terms laid out in the original will.
When thinking about changing a will, it’s essential to keep in mind tax implications. A deed of variation doesn’t let you avoid tax, but it can help you use tax reliefs better.
A deed of variation allows you to redistribute assets, consider tax efficiencies, and even include new beneficiaries.
Both parties need to agree on changes proposed in a variation. Sometimes, there might be a premium or cost involved in making these amendments, and you need to prepare for potential legal scrutiny or advice if you choose to go down this route.
Here’s a quick rundown of what a deed of variation can achieve:
- Redistribute assets among family members
- Set up a trust
- Add or remove beneficiaries
If you’re considering a deed of variation, it’s a good idea to seek legal advice. This ensures you meet all legal criteria and optimise the benefits of any changes you’re looking to make.
When Is a Deed of Variation Needed?
A deed of variation is a useful tool when navigating inheritance issues.
It may be needed if you're a beneficiary looking to adjust your share of an inheritance from a will. This can be particularly relevant if you aim to reduce inheritance tax liabilities by redirecting your inheritance to someone else, perhaps a younger family member.
If you're dealing with a significant estate subject to inheritance tax, altering the distribution through a deed of variation could be financially beneficial. You could use a deed of variation to distribute assets in a way that minimises tax exposure, such as reallocating to beneficiaries who are exempt from or subject to lower taxation.
Intestacy is another situation where you might need a deed of variation. This is where an estate is distributed according to intestacy rules, as the deceased didn’t leave a valid will. These rules might not reflect the deceased’s wishes or meet the needs of the beneficiaries. This is where a deed of variation allows you to adjust the distribution to better align with the family's desires.
As an executor, a deed of variation can be your ally when handling probate. Sometimes, beneficiaries might want to revise how assets are split after the grant of probate. This might be necessary to resolve family disputes or provide for someone not included in the original inheritance arrangements.
Given these scenarios, a deed of variation can be an essential option to consider. You must ensure any changes comply with legal requirements by completing the deed within two years of the death. This will also ensure that it’s recognised for tax purposes.
How to Write a Deed of Variation
A deed of variation allows you to change the distribution of an inheritance.
To write a deed of variation, you need to ensure that you understand its purpose, and you'll need to act within two years of the deceased’s death for tax purposes.
Here are the steps you need to take to write a deed of variation. Though you can do it yourself, seeking legal advice from a solicitor might be beneficial.
Step 1: Identify Beneficiaries Involved
Begin by identifying all the beneficiaries involved in the inheritance. You'll need their agreement to make any changes. Talk with each person to ensure everyone is on the same page.
Without their consent, you can't execute the deed. A solicitor can help mediate discussions if there’s disagreement.
Step 2: Draft the Deed
Write the deed clearly, detailing the specific changes to be made. This should include what parts of the inheritance are being altered and how.
While you can draft this yourself, a solicitor can ensure the language meets legal standards and avoids potential pitfalls.
Step 3: Formal Agreement and Signatures
Get the deed signed by all parties involved. It’s essential that everyone affected by the changes agrees and signs the document. This is crucial for the deed to be valid.
If you’re uncertain, a solicitor can verify that everything is in order.
Step 4: Notify Relevant Authorities
Once signed, send copies of the deed to relevant authorities, particularly if it affects taxable estates.
Keep copies for your records. Though HMRC doesn’t always need notification unless taxes change, ensuring compliance with any requirements is essential.
Seeking legal advice can clarify these obligations.
Step 5: Consider Legal Advice
Though it’s possible to complete a deed of variation without legal help, consulting a solicitor can ensure everything is done correctly. They can guide you through the process, advise on legal requirements, and reduce the risk of errors.
Legal advice can be invaluable if the inheritance involves complex tax liabilities.
