There are several reasons why you might want to change someone’s will after they have died, such as avoiding extra inheritance tax and ensuring that the money is going to the right people. Luckily, it is possible to do this with a deed of variation, provided that every beneficiary of the will signs an agreement to the changes.
The most common reason why people make a deed of variation is because they want to avoid unnecessary inheritance tax. Not everyone who writes a will is given the best advice on how to avoid inheritance tax as far as possible. Even if they have made provisions for this, tax laws are always subject to change. By making a deed of variation, it is possible to ensure that as much of the estate as possible is given to the beneficiaries and as little as possible is paid in taxes.
Other reasons why you might want to make a deed of variation are related to the beneficiaries. Perhaps your loved one didn’t have time to change their will before they died and left someone out who was very close to them in their later years, such as a new partner. Another possibility is that one of the beneficiaries might need the money more than others, in which case the other beneficiaries may choose to make a deed of variation to ensure that the money is given to the person who needs it the most.
In 2020/21, the inheritance tax threshold is £325,000. Anything over £325,000 is known as their ‘net estate’. Inheritance tax is currently charged at 40% of your net estate.
The best way to reduce inheritance tax is to transfer the total estate to a spouse or civil partner. If you leave your estate to your spouse or civil partner, no inheritance tax is paid. This also increases the spouse/civil partner’s inheritance tax threshold to £650,000, so it is an extremely worthwhile change to make if possible.
If there is no living spouse or civil partner, it is also possible to reduce inheritance tax by leaving a portion of the estate to charity. If 10% of the net estate is left to charity, the inheritance tax rate is reduced to 36% from 40%.
You can make a deed of variation with a solicitor or a professional wills service. If you want to make a deed of variation to reduce inheritance tax, you must do this within two years of your loved one dying. If your reasons don’t involve inheritance tax, then this can be done at any time before or after the entire probate process has taken place.