Deeds of Variation: What They Are and When They Can Be Useful

When someone passes away, their estate is usually distributed in accordance with their Will or, if there is no Will, under the rules of intestacy. But what happens if the beneficiaries would prefer to rearrange how the estate is divided? This is where a Deed of Variation can be a very useful legal tool.

A Deed of Variation is a legal document that allows beneficiaries of an estate to change how the estate is distributed after someone has died.

In simple terms, it gives beneficiaries the option to “redirect” all or part of their inheritance to another person or cause, even though the Will or intestacy rules say otherwise.

Importantly, the deed must be made within two years of the date of death, and any changes must be agreed upon and signed by all the beneficiaries affected by the variation.

There are several situations where a Deed of Variation might be appropriate:

If a variation directs part of an estate to someone else – for example, directly to a charity – this can reduce the amount of Inheritance Tax payable. For tax purposes, the law treats the estate as if the deceased had made the gift themselves. This is known as “reading back” the variation to the date of death.

Example: If you redirect £50,000 of your inheritance to a charity, the gift is treated as if the deceased made it directly. This can reduce the IHT rate on the estate from 40% to 36% if 10% or more of the estate goes to charity.

Sometimes a Will or the intestacy rules do not provide for a person who the family feels should benefit – perhaps a stepchild, cohabiting partner, or another relative. A Deed of Variation can redirect part of the estate to them.

In some cases, a variation can help reorganise assets in a more practical way. For example, if one beneficiary is inheriting a property they don’t want to maintain, they might prefer to redirect it to another family member who does.

Parents who inherit from their own parents may decide to redirect their share directly to their children. This can be a way of providing financial support to the next generation while reducing the tax burden.

If you inherit money but then gift it to your children, this will use your gifting allowance and could create an IHT liability if you do not survive the gift by seven years. If a Deed of Variation is used instead, the law treats the gift as if the deceased made it, so it does not impact on your own tax position.

For a Deed of Variation to be valid and effective for tax purposes, it must meet certain requirements:

The deed does not change the Will itself – it changes how the inheritance is distributed. Each beneficiary can only vary their own share of the estate, though all affected beneficiaries can work together if the variation impacts their entitlements.

It’s important to understand the limitations:

A Deed of Variation can only be made once concerning the same assets. If it is wrong, there is no going back to correct it. This is why professional legal advice is strongly recommended.

If all beneficiaries agree and no complications arise, preparing a Deed of Variation typically takes two to four weeks. However, the process can take longer if:

Remember, the variation must be completed within two years of death to qualify for favourable tax treatment.

At Franklins Solicitors, our Wills, Trusts and Probate team regularly advise on Deeds of Variation and can guide you through the process. Whether your priority is tax planning, fairness for family members, or simplifying the estate, we can ensure the variation is carried out correctly and in line with your wishes.

If you would like to discuss a Deed of Variation or have questions about estate planning, contact our team for clear, practical advice.