PRIVATE CLIENT

Deeds of Variation - can you change the terms of a will?

Everyone is free, subject to certain conditions, to change the terms of their will either by rewriting their will or by executing a codicil, a separate document that amends the provisions of an already executed will. Indeed, we advise our clients to regularly review their wills every five years or after events such as, but not limited to;

  • Separation or divorce
  • Getting married (this may revoke any will made before marriage)
  • Having a child
  • Moving house
  • Change in financial circumstances or
  • If the executor named in the will dies

But can you change the terms of a will after someone dies?

Whilst you cannot re-write someone’s will after they have died, there is scope for anyone who benefits under the will or intestacy (known as a beneficiary) to redirect their inheritance.

In general terms, when a person dies, their estate is distributed in accordance with the terms of their proven will or, in the absence of a will, under the intestacy rules.

A Deed of Variation (also know as a Deed of Family Arrangement) allows a beneficiary under a will (or an intestacy) to re-direct part, or all, of the estate they have received.

The beneficiary may want to re-direct their inheritance (in part or in whole) for many reasons, but some reasons our clients have sought our advice is;

  • They wish to benefit a charity
  • They wish to benefit a child or grandchild who is not mentioned in the will (or who doesn’t benefit under the rules of intestacy)
  • They may want to take advantage of changes in inheritance tax or other tax  rules that have occurred since the execution of the original will
  • They want to redirect their inheritance into a trust

To be tax efficient a Deed of Variation must be prepared and executed within two years of the date of death of the testator, and the beneficiary who is executing a Deed of Variation must not receive anything in return for doing so.

A question sometimes asked by clients is “are there any alternatives to a Deed of Variation?”.

An alternative is a document known as a Deed of Disclaimer; this is where the beneficiary simply rejects their inheritance. It differs from a Deed of Variation as the beneficiary cannot direct where their inheritance goes, the inheritance simply goes to the next entitled.

Deeds of Variation have always been looked at carefully by HM Revenue & Customs. In the Budget a few years ago, the Government announced it would conduct a review looking at the use of Deeds of Variation for tax purposes.

The outcome of the review was that:

The Government has listened to the views and comments put forward during the call for evidence process and will not introduce new restrictions on how DoVs can be used for tax purposes, but will continue to monitor their use”.

So, while Deeds of Variations are still a valuable and useful tool in the administration of a deceased’s estate, we cannot be certain as to how long they may be available.

 

About the authors


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Michael Derrick

Partner

Expert advisor on estate administration, will drafting, inheritance tax planning and Lasting Power of Attorney.

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