After someone dies, beneficiaries may decide that they would like to change how some or all of their inheritance is distributed. A deed of variation can allow assets passing under a will or the intestacy rules to be redirected to another person, organisation or charity. This can provide flexibility where the original distribution no longer reflects the family’s circumstances or where a beneficiary wishes to make alternative arrangements.
However, for the variation to be effective, the correct people must agree to and sign the document. Understanding who needs to sign a deed of variation can help ensure that any changes are made correctly and avoid complications during the administration of the estate.
What Is a Deed of Variation?
A deed of variation is a legal document that allows a beneficiary to redirect some or all of the inheritance they are due to receive. This may involve passing assets to another family member, providing for someone who was not included in the will or changing how an inheritance is divided.
A variation can also be made where someone dies without a valid will and their estate is being distributed under the intestacy rules. It is therefore not necessary for there to be a will before a deed of variation can be considered.
The deed does not rewrite the deceased’s will itself. Instead, it changes the destination of the inheritance that would otherwise pass to the beneficiary making the variation.
Who Needs to Sign the Deed?
Any beneficiary whose inheritance is being reduced or otherwise affected by the variation must agree to the change and sign the deed. A beneficiary whose entitlement remains unchanged will not usually need to provide their consent.
If several beneficiaries are giving up or redirecting part of their inheritance, each affected beneficiary will need to agree to the relevant changes. One beneficiary cannot use a deed of variation to alter another beneficiary’s entitlement without their consent.
This means that the people required to sign will depend on the particular changes being proposed. Where only one beneficiary is redirecting their own inheritance and no other entitlement is affected, the process may be relatively straightforward.
Do the Executors Need to Sign?
Executors do not always need to sign a deed of variation simply because they are administering the estate. If a beneficiary is redirecting their own entitlement and the variation does not otherwise affect the administration of the estate, the executor’s agreement may not be required.
However, their involvement may be necessary in certain circumstances, particularly where the variation results in additional inheritance tax being payable or affects how the estate is to be administered.
The executors will also need to know about the variation if they are required to distribute estate assets differently from the terms of the original will or the intestacy rules. Ensuring that the executors receive the necessary information can help avoid assets being distributed incorrectly.
What if Children or Other Beneficiaries Are Affected?
Particular care is required if a proposed variation would reduce the inheritance of a child or another person who cannot legally consent to the change. A parent or guardian cannot simply agree to give up a child’s inheritance on their behalf.
In these circumstances, court approval may be required before the proposed arrangement can proceed. The court will consider whether the proposed changes are appropriate and whether they are in the interests of the person who cannot consent for themselves.
This can make the process more complex, so seeking legal advice at an early stage is important to ensure that vulnerable beneficiaries are properly protected.
When Should a Deed of Variation Be Completed?
A deed of variation can be made after the deceased’s death, but certain requirements must be met if the variation is intended to have particular inheritance tax or capital gains tax treatment. This will generally include completing the variation within two years of the date of death.
The variation should clearly identify the inheritance being redirected and set out who will receive it instead. Where the relevant tax treatment is intended to apply, the document must also contain the appropriate wording.
It is therefore important to consider any proposed changes promptly and obtain advice at an early stage, particularly where the variation is intended to have inheritance tax or capital gains tax consequences.
Why Might Someone Use a Deed of Variation?
There are a number of reasons why a beneficiary may wish to redirect an inheritance. They may feel that another family member has a greater financial need, wish to provide for someone who was excluded from the will or prefer assets to pass directly to the next generation.
A deed of variation may also form part of wider estate or tax planning. However, the consequences will depend on the individual circumstances, and a variation should not be entered into without considering its legal and financial implications.
Taking advice before making the change can help ensure that the proposed arrangement achieves the intended outcome.
Key Considerations
A deed of variation can provide valuable flexibility when administering an estate, but everyone whose entitlement is adversely affected must agree to the changes. Ensuring that the document is prepared and signed correctly is essential, particularly where tax considerations or vulnerable beneficiaries are involved.
It is also important to consider the proposed variation at an early stage and, where relevant, within the two-year period following the death. Obtaining advice can help ensure that the correct people provide their consent and that the variation has the intended legal and tax effect.
We Can Help
Changing the distribution of an estate can involve important legal and tax considerations. Our private client specialists can advise you on whether a deed of variation is appropriate, identify who needs to consent and ensure the necessary documentation is prepared correctly.
If you are considering a deed of variation or need advice about changing an inheritance, contact us to discuss your options.
