To ensure that the change is effective for Inheritance Tax purposes, the best way to achieve this is to enter into a Deed of Variation, which should be signed within two years of the date of death.

We strongly advise seeking professional advice to ensure all legal formalities and conditions are complied with. In some circumstances, the consent of other beneficiaries and the executors will also be required, e.g. if a beneficiary’s inheritance will be reduced by the variation, or if the variation will result in additional Inheritance Tax being paid. 

In some circumstances, the Deed of Variation will need to be sent to HM Revenue and Customs if the effect of the variation is to change the overall amount of Inheritance Tax paid by the estate.  It should be noted that any beneficiary under the age of 18 cannot consent to a Deed of Variation, and an order of the Court would be required to vary a child’s entitlement.

A few reasons why a Deed of Variation may be appropriate include:

• To add someone who was left out of the Will, for example if another child or grandchild was born after the Will was made
• To even out inheritance, for example if one child was left a smaller percentage than another 
• To make the distribution of the estate more efficient for inheritance tax purposes
• To set up a trust
• To clear up any uncertainty in the Will

If there is no Will, the deceased’s assets will be distributed in accordance with the Intestacy Rules. It is still possible to prepare a Deed of Variation to vary the operation of the Intestacy Rules, provided that all of the beneficiaries are over 18 and in agreement to the proposed variation. 

There are a number of rules that must be met in order to use a deed of variation:

• Any deed must be made within two years of the death of the person leaving the estate
• The variations must be agreed by any beneficiary who is left worse off by them
• Those beneficiaries cannot be paid or given something in exchange for their agreement

The deed of variation changes the terms of a will for tax purposes and any gifts made in this part of the process are treated as if they were made by the deceased.

Even if the deceased did not leave a will, a deed of variation can also be used to redirect an asset that a beneficiary has received under the intestacy rules, perhaps to reduce the tax liability of the estate, for example:

• To benefit from the lower rate of inheritance tax by making an appropriate gift to charity
• Redirecting the asset to another beneficiary to make the best use of available exemptions