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Deeds of Variation Guide

When a person dies their estate needs to be administered by the named Executors (if there is a valid Will) or by Administrators (if there is no valid Will or if named Executors are unable or unwilling to act).

The terms of the Will or the distribution on intestacy may not be in accord with the wishes of some or all of the beneficiaries concerned e.g. if they wanted part or all of their entitlement to pass to others such as children. Alternatively the Will or intestacy may not mitigate the effect of Inheritance Tax (IHT).

In many cases the answer to the problem is for a Deed or Instrument of Variation to be prepared which effectively rewrites the Will to suit the wishes of the beneficiaries concerned. However in order to be fully effective (particularly for IHT purposes) the document must be executed before 2 years have elapsed from the date of death. It is important therefore that prompt consideration is given to this aspect before the time limit is exceeded. Specialist professional help should also always be obtained to ensure that every aspect is considered and dealt with appropriately.

In order for an estate (or part of it) to be redirected under a Deed of Variation it is necessary that all the relevant beneficiaries are of age and have full mental capacity and all must agree and be parties to the rearrangement. The Executors or Administrators would not normally be parties to the Deed but would of course need to know what has taken place. In certain circumstances (where IHT is affected or where trusts are being created or changed) it will also be necessary to advise Inland Revenue Capital Taxes Office.

It should also be borne in mind that a Deed of Variation can also (post death) sever a beneficial joint tenancy of assets so that they are held as “tenants-in-common”. This could be of particular use where a spouse has died and jointly held assets have passed to the surviving spouse but where it would have been more appropriate for a share of the assets to pass under the Will or intestacy (and perhaps amended by the Deed of Variation to be more IHT efficient).

A professional Executor/Administrator has a duty of care to ensure that beneficiaries are aware that a Deed of Variation could be effected should they require it but regrettably in some cases this can be overlooked. The Deed of Variation is an essential tool for estate planning but should not be relied upon. The law may change in the future to prevent them being used so it is imperative that Wills are always put in place and regularly reviewed to ensure that they keep up with changing circumstances (including changes in the law).

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