Deed of variation: how to vary your entitlement to someone’s estate after their death

A deed of variation is an official document that allows the beneficiaries to change who inherits the estate. A deed of variation can either be made by the beneficiaries of a will or by the people who stand to inherit under the rules of intestacy.

This can be a good way of reducing inheritance tax and ensuring that money ends up going to the right people – or the people who need it most.

There are a number of reasons you may want to change someone’s will after their death, including:

• The will was written a long time ago If your loved one wrote their will a long time ago, you may find that their wishes don’t reflect how they felt at the time of their death. This could be the case if the will was written before a new relationship or marriage and doesn’t provide for their current partner. You may also want to change a will if someone was disinherited because of a temporary fallout at the time the will was written.

• One of the beneficiaries needs the money more If one beneficiary needs the money more than the others, they may try to claim against the estate. A deed of variation is a way of agreeing a formal settlement to adjust the will and allow them to receive more.

• You want to reduce the inheritance tax bill When people write their will, they don’t always consider the inheritance tax implications of their wishes. And even when they do, tax rules can change at any time, so there may be different options available now compared to when the will was written. This is a common reason people choose to change a will – for example, by writing in gifts to charity to secure a reduction in the rate of inheritance tax.

The inheritance tax threshold for 2023/24, also known as the nil rate band, is £325,000. If the estate is worth more than £325,000, inheritance tax will need to be paid on anything over that value. This is usually charged at 40%.

Here, we’ll look at the two main ways you can reduce your inheritance tax bill with a deed of variation.

Transfer inheritance to a surviving spouse

Gifts between spouses are exempt from inheritance tax. This means that someone can leave an estate worth over £325,000 to their spouse or civil partner without incurring any inheritance tax.

In this scenario, the inheritance tax allowance of the person who died is also transferred to the surviving spouse, effectively increasing the spouse’s inheritance tax threshold to £650,000. It may therefore be a good idea to transfer inheritance to the surviving spouse if they are likely to provide for the original beneficiaries in the future.

Example: Jane and her husband, Mark, wrote their wills together and both chose to share everything equally between their two children. The estate was worth £500,000.

When Jane died, her children realised that they would need to pay £70,000 inheritance tax from the estate. Instead, they decided to make a deed of variation and transfer the estate to their father, Mark. This meant that Mark also inherited Jane’s inheritance tax allowance, doubling his total allowance £650,000.

When Mark dies, the children will be able to inherit the entire £500,000 estate without needing to pay inheritance tax.

Leave part of the estate to charity

When someone leaves behind an estate worth more than their inheritance tax threshold, everything over the threshold is known as their “net estate”.

Usually, inheritance tax is charged at 40% on the net estate. However, if 10% of the net estate is left to charity, the amount that needs to be paid is reduced to 36%.

Example: Polly died and left everything to her only child, Ryan. Polly’s net estate was worth £525,000 after taking off debts and funeral expenses and her inheritance tax threshold was £325,000. This meant that her taxable estate  was £200,000.

When Ryan started applying for probate, he realised that £80,000 inheritance tax was due (40% of the net estate.) This would have left him with a total of £445,000.

Instead, Ryan decided to make a deed of variation and leave roughly £20,000 to charity (10% of the net estate). This caused  the net  estate to be reduced to £505,000, leaving a taxable estate of £180,000. It also caused the inheritance tax rate to be reduced to 36%.

After leaving £20,000 to charity, the new inheritance tax bill was £64,800 – a saving of . £15,200.  Meanwhile, Ryan received £440,200 – only £4,800 less than he would have originally inherited.

We can provide you with a free quote and answer any questions you have about making a deed of variation. And if you need to apply for probate, we can help with that too.

You can make a deed of variation before or after applying for probate – you may even choose to make a deed of variation after the estate has already been distributed. However, if you’re making the deed of variation to reduce the amount of inheritance tax that needs to be paid, this must be done within two years of the death.

A deed of variation costs £600 plus VAT with our partner law firm. Depending on your situation and the changes you wish to make to the will, this could potentially save you tens of thousands in inheritance tax.

Yes, you can still make a deed of variation if there is no will. However, it will need to be signed and agreed upon by everyone who stands to inherit under the rules of intestacy. You can find out more about the rules of intestacy.

No, once made you cannot revoke a deed of revocation, so you must make sure it's what you want.