How does a deed of variation work?

A deed of variation is a document that allows the beneficiaries named in the Will to change the distribution of the estate. For example, it can allow for a beneficiary to reduce their share in order to give it to someone who did not inherit.

Can a beneficiary use a deed of variation?

A deed of variation allows beneficiaries to redirect their entitlement to another person. It can be used by anyone who inherits from a will, or rules of intestacy if there is no will in place.

Can a minor sign a deed of variation?

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.

Can a post death variation be a deed of variation?

But they are specifically excluded from being the subject of a post-death variation by section 142. In effect, they are the result of Inheritance Tax planning not being up to date at the time of death. Income tax and deeds of variation. There are no specific income tax provisions equal to the Inheritance Tax and Capital Gains Tax provisions.

What happens when a variation is made in a will?

The law says that, subject to strict conditions, a variation takes places as if it had been made by the deceased (and not by the beneficiary). It is then “read back” into the will of the deceased for IHT purposes. If the deed of variation changes the amount of IHT due, a copy of the deed of variation must be send to HM Revenue & Customs.

When does a deed of variation need to be completed?

It can be used by anyone who inherits from a will, or rules of intestacy if there is no will in place. To be valid, the deed of variation must be completed within 2 years of death.

Can a person revoke a deed of variation?

If a deed of variation is made properly, you can’t usually revoke it. Also if you make another deed of variation later to try to change the destination of the same assets or inheritance, the transfer of assets will have the same tax status as if you gave the gift yourself, rather than it coming from the person who has died.

What is the tax threshold for deed of variation?

As mentioned, if you transfer your inheritance using a deed of variation for the will after a death, HMRC will treat the gift as though it came from the person who died. This can sometimes help you take advantage of the different kinds of tax relief available. Now, the current inheritance tax threshold is £325,000.

When to use a variation by way of agreement?

Indeed, where a variation is for the benefit of, and to be relied upon by one party only, a deed of variation will commonly be used. A variation by way of agreement, be it by email correspondence or an oral representation, is not as robust as a variation by way of deed from an evidentiary point of view.