Service
Deeds of Variation
Beneficiaries have two years to vary their entitlement without triggering Inheritance Tax (IHT) or Capital Gains Tax (CGT) consequences.
Main uses of a Deed of Variation
1. Tax Planning / Passing Inheritance to Others
Example: Angela receives £100k from a deceased aunt and wants to give £50k to her child Max.
Normally, this would be a Potentially Exempt Transfer (PET) subject to the 7-year rule.
A Deed of Variation signed within two years of the aunt’s death treats the gift as coming directly from the will, avoiding the 7-year PET rule.
2. Protecting Assets from Long-Term Care Costs
Example: Jack and Jill are married with two children. Their wills leave everything to each other. Jack dies; Jill may need residential care, so assets risk being depleted down to £14,250.
Solution: Jill signs a Deed of Variation within two years to establish a trust, protecting capital from care costs.
Important considerations
- Jill must be physically and mentally fit at the time of signing.
- If not, the Local Authority may view it as deliberate deprivation.
- Where possible, care-planned wills from the start are a safer option.
Key point
Deeds of Variation are a powerful tool for tax planning and care planning but must be used correctly and within the legal timeframe.