A deed of variation allows the beneficiaries of an estate to vary the terms of the will or the intestacy rules, and to redirect some or all of their interest in the estate to others. The variation of the interest will then be ‘read back’ as if it was made in the will itself.
The deed must be executed within two years of the date of death to be effective for inheritance tax purposes. It can be made by anyone over 18 with mental capacity who stands to benefit under a will or the intestacy.
A variation may be useful for tax planning purposes to enable adult children inheriting their parents’ assets to pass all or part of their inheritance to their own children without this being treated as a lifetime gift and potentially using up their own inheritance tax allowance. It can also be used to minimise inheritance tax by making gifts to charities and to address an imbalance between beneficiaries and to make provision for someone who may have been left out in exchange for excluding their right to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975.