What is a deed of variation?

Typically, the distribution of an estate is determined by a will, or, if there is no will, the laws of intestacy.

Often, however, it is possible to override a will or intestacy with a deed of variation.

What is a deed of variation?

If a beneficiary does not wish to receive their entire share, they could wait until they receive it, and then hand it over to someone else. However, this may be tax inefficient.

A gift varied by a deed of variation – so long as the deed contains the appropriate wording and is made within 2 years of death – will be treated as if the gift was made by the deceased. For various reasons, this often means that a deed of variation is tax-efficient, particularly for capital gains tax.

Not always tax efficient

A deed of variation is not always tax efficient. For example, if assets were due to pass to a surviving spouse or civil partner, varying this arrangement may result in extra inheritance tax, because those assets would no longer benefit from the spouse or civil partner exemption.

Why might a beneficiary wish to vary their share?

If, for example, a surviving spouse is old and takes the view that they have no need for their inheritance, they can direct all or part of it to pass – for example – to their children.

There are other scenarios in which a variation might be appropriate.

When to make a deed of variation

A deed of variation should be executed after the grant of representation has been received.

It can only be made by a beneficiary, not by personal representatives, unless a personal representative and beneficiary is the same person.

Relying on a deed of variation

A deed of variation cannot be made by a child beneficiary or a child’s parent (though on rare occasions it may be possible for a court to approve a variation on a child’s behalf).

For this reason, and others, people planning the distribution of their estate should not rely on a deed of variation to “fix” problems after death.

If a variation is not possible, the estate must be distributed in accordance with the will or intestacy.

How to make a deed of variation

Deeds of variation require careful planning. We recommend seeking professional advice from a solicitor or other probate professional.