Bereavement is always a challenging time. Family and friends of loved ones must balance mourning with logistical necessities. Chief among these is management of the will of the deceased, and appropriate division of their estate. If questions are raised by the last will and testament of the deceased, legal processions may be required.
Can You Change a Will After Somebody Dies?
Not exactly. A last will and testament remains a legally binding document, assuming the deceased was of sound mind and judgment while writing the will. If you can prove this was not the case, you are entitled to dispute the will.
Even if the will stands, however, distribution of the estate of the deceased can be amended. In order to achieve this, you will need to request a deed of variation.
What is a Deed of Variation?
Sometimes referred to as a deed of family arrangement or a deed of disclaimer, a deed of variation does not rewrite the will of the deceased. It does, however, permit a recipient of inheritance to amend what they are entitled to. This could involve sharing the value of an estate among family members, or even making a charitable donation.
A deed of variation only permits an individual to give away part of their own inheritance. It is not an invitation to completely rewrite a will. Sometimes, people will request a deed of variation for personal reasons. They may consider a family member to have been overlooked in the will and worthy of more. Frequently, however, a deed of variation is used to manage any inheritance tax payable.
An individual that inherits an estate to the value of £325,000 or more is liable for inheritance tax. HMRC will levy a taxation of 40% against the total value of the inheritance. Naturally, this has the potential to be a very substantial sum of money. By utilising a deed of variation, these fees can be circumnavigated while ensuring that all parties are treated fairly.
When is a Deed of Variation Used?
Here are three possible examples of when a deed of variation may be used.
Example #1
The last surviving parent of four children passes away. As a firm believer in tradition, this parent left their entire estate – totalling £800,000 – to the eldest child. The children, including the eldest, mutually agree that the estate should be divided equally among them. The deed of variation divides the estate into four separate payments of £200,000 each. Everybody receives their share of the estate, and nobody needs to pay inheritance tax. If the eldest child accepted the inheritance and then shared the payments, the total pot would have been reduced to £480,000 after tax.
Example #2
An elderly person dies, leaving no family behind. The deceased wrote in their will that they wish to leave their entire estate to a kindly neighbour, who has been a loyal friend for many years. The neighbour appreciates the gesture but feels uncomfortable accepting this money. A deed of variation could be used to donate the estate to charity, who will not be liable for tax payments. The neighbour could also opt to donate some of their inheritance to charity and keep the remainder. If the sum payable to the neighbour remains above £325,000, the tax rate due drops to 36% due to the charitable donation.
Example #3
An elderly gentleman passes away after a long illness. He made his will some time ago, not expecting to live as long as he did. The deceased had a daughter from a previous marriage, estranged when the will was written. As a result, the deceased left his entire estate to his second wife in his will. Toward the end of his life, father and daughter reconciled and made peace. The wife may choose to provide a share of the estate to the daughter, believing it would be what the deceased wanted. The will has not been changed, but the wife is wilfully gifting a share of her inheritance pre-taxation.
Are There Restrictions to a Deed of Variation?
There are some restrictions to when a deed of variation is permitted.
- You cannot use a deed of variation to claim a larger piece of the estate of the deceased. This deed is for gifting your inheritance to others, not increasing it. If you wish to dispute your inheritance, you’ll need to legally challenge the will.
- All parties – recipients and those giving up their right to any assets – must agree to the deed of variation. You cannot make decisions that impact the inheritance of others without their permission.
- All variations to the will must be clearly assigned and agreed in writing, reviewed and approved by a legal professional.
- All beneficiaries of the deed of variation must be aged 18 or over. Changes to a will that impact upon minors must be approved by a court.
- Anybody that gives up inherited assets in a deed of variation cannot be financially compensated. A deed of variation is a gift, not an exchange, sale or trade.
If all parties agree and sign the appropriate documentation, and all beneficiaries are aged over 18, there is no need for a deed of variation to enter the courts. This only becomes a requirement if the will is contested and a ruling from an independent adjudicator is needed.
When is a Deed of Variation Carried Out?
A deed of variation must be completed within two years, in order to avoid falling foul of inheritance tax law. There is little to gain by delaying the application. A deed of variation is best sought immediately upon concluding probate and receiving a full valuation of the estate. This will aid an informed decision as to whether a deed of variation is advisable.