Funeral Inspirations – Funeral Ideas and Advice

Logo Here
Contact 24/7
Home » Deed of Variation

Deed Of Variation

It may seem that once someone has left you something in their will that there is very little, if anything, that you can change. It is what it is. You either keep the asset, sell it or give it away, pay the inheritance tax, and that is that. But the truth is that there are other options available. Using a deed of variation can change your inheritance’s status and your taxation liabilities substantially.

What Is A Deed Of Variation?

A deed of variation allows the will’s beneficiaries to change the way the guarantor allocates the assets. So, for example, let’s say you received a plot of land from a will. But you might know that another member of the family needs the property more. Or maybe you don’t want the tax responsibility that comes with the land. In this case, you might choose to give the property over to the other person. 

The general purpose of 99% of deeds of variation is for tax planning reasons, which is why you should consult the experience of a solicitor before drawing up a deed like this.

A deed of variation is typically unnecessary unless the will in question involves land or a house. Still, it’s a good idea to have a solicitor draw up the deed to make the property transfer completely enforceable.

Who Can Be The Beneficiary?

You don’t have to give the deed of variation to the child of the original benefactor. As the property’s original recipient, you can choose to skip a generation and give the property to the next generation down. Still, the new deed’s recipient will need to be of legal age and full mental capacity.

How Much Does A Deed Of Variation Cost?

Fees, like solicitors, will vary depending on the practice. In general, you should expect to pay around £1000-£1500 to get a deed of variation legally drawn up. If, as we have mentioned, you are doing this for tax reasons, then it could well be money well spent.

Can A Deed Of Variation Be Revoked?

Once you issue a deed of variation, you can’t undo it. If you go through with this, you’ll need to hire a solicitor. In the United Kingdom, it’s illegal to accept consideration (e.g., money) from outside the estate to do this.

Language And Clarity Are Crucial

Most of the time, when beneficiaries choose to make these changes, they do it to lower their tax liability. Regardless, the deed must state that you intend to apply the Inheritance Tax Act of 1984 along with the Taxation of Chargeable Gains Act that passed eight years later.

According to legal experts, every beneficiary that might lose out due to the variation needs to agree. They all must be a party to it before you can redirect some or all gifts made in a will after the grantor has died.

Others have said that only the original beneficiary’s execution from the will and the new beneficiary is necessary. This is another obvious reason to be sure that you’re complying exactly with the law by hiring a solicitor who can handle this for you. 

Timing Is Everything

Execution of a deed of variation within two years of the original benefactor’s death means the tax effects become retroactive. Briefly, if an inheritance increases the beneficiary’s tax liability, then they can go to court and request a deed of variation. In short, you have 2 years to get a deed, after the death occurs.

Once approved, it is as if they’ve never received the inheritance. Obviously, undertaking the process sooner rather than later will pay dividends to the person asking for the variation.

Disadvantages of Deed of Variation

Receiving means-tested benefits of any kind can seriously complicate setting up a deed of variation. Means-tested benefits are payments to individuals who’ve demonstrated that their income and any capital are below a specific limit.

The problem arises because the deed of variation means that money is being voluntarily given to someone else. Voluntarily giving away money that could be considered part of the means-testing assessment could leave you ineligible for any benefit. 

It may not matter that you’d be below the specified limit even with that gift added to your own income. It may be deemed capital that should have been assessed. Make sure you have expert advice from your attorney, so you don’t lose out financially. You could be liable to prosecution if you continued to make benefit claims after executing a deed of variation.

A Deed Of Variation Makes A Change Possible

Remember, this is not a DIY process. You could end up with a transfer of property or money, which will not hold up if someone takes you to court. And you could cause yourself and your family serious financial or legal problems. In short, someone’s “Last Will and Testament” is not immutable after the person passes away. But with a manoeuvre like the deed of variation, a will is changeable after the fact.

Deed Of Variation Template And Example

Because of the custom nature of a deed of variation, it’s quite hard to produce a template, they really are bespoke to each person and situation. In general, the deed will include the following items:

What Is Included In A Deed Of Variation?

This deed of variation covers:

  • the initial beneficiary (ie who inherited the ‘thing’ in the will)
  • who will be the new beneficiary under the deed of variation
  • details of the deceased and their will
  • what are the things, for the will, that is being changed (ie assets, money or estate)
  • how the gifts are being given out
  • a legal witness(es)

Deed Of Variation Also Know As

Deed of family arrangement, after death variation deed, deed of disclaimer, after death variation to a will,