Understanding Deeds of Variation
Thinking about how to make the most of your inheritance? A Deed of Variation could help you redirect inherited assets in a way that aligns with your financial goals, supports loved ones, and reduces future inheritance tax liabilities.
At Schroders Personal Wealth (SPW), we understand that receiving an inheritance can be both a privilege and a responsibility. A Deed of Variation offers a way to tailor your inheritance to better suit your personal circumstances, family needs, or long-term financial goals.
What is a Deed of Variation?
A Deed of Variation is a legal document that allows someone who has inherited under a Will or the intestacy rules to redirect all or part of their inheritance to someone else. Intestacy occurs when a person dies without leaving a valid Will, and their estate is distributed according to a fixed legal order set out in UK law. A Deed of Variation must be completed within two years of the date of death to be valid for inheritance tax purposes.
This tool is particularly useful when:
- You don’t need all or part of your inheritance for your own financial security.
- You want to pass on your inheritance to other family members or charitable causes.
- You’re looking to reduce your own future Inheritance Tax (IHT) liability.
- You wish to create a trust to receive the inheritance instead.
Why might you use one?
To reduce your own IHT liability
If your inheritance increases the value of your estate, it could also increase the IHT payable when you pass away. Redirecting the inheritance via a Deed of Variation means it won’t be counted as part of your estate—potentially saving thousands in future tax.
To support family members
You may wish to pass your inheritance to children, grandchildren, or a vulnerable relative. This can be done directly or via a trust, giving you control over how and when the funds are used.
To create a trust
Trusts can help protect assets from divorce, creditors, or poor financial decisions. You can use a Deed of Variation to place your inheritance into a trust, where trustees manage the funds on behalf of beneficiaries. This is particularly useful for:
- Minor children
- Vulnerable adults
- Multi-generational planning
Deed of Variation examples in practice
Example 1: Passing wealth to grandchildren
A client inherited £250,000 from a parent. Already financially secure, they were concerned that this extra money might increase the amount of inheritance tax their own estate would have to pay when they die. Using a Deed of Variation, they redirected £150,000 into a discretionary trust for their grandchildren. This removed the funds from their estate immediately and allowed the trustees to manage distributions over time.
Example 2: Supporting a vulnerable relative
A beneficiary inherited £100,000 but wanted to support a sibling with learning difficulties. They used a Deed of Variation to place the funds into a trust managed by professional trustees. This ensured the sibling would receive support without jeopardising their eligibility for state benefits.
Example 3: Rebalancing family support
A client inherited a large sum but felt their sibling had greater financial need. They used a Deed of Variation to pass £75,000 to their sibling, helping with housing costs and reducing their own estate value for IHT purposes.
Frequently asked questions
Can I use a Deed of Variation if there’s no Will?
Yes. If someone dies intestate, beneficiaries can still use a Deed of Variation to rearrange the distribution of the estate.
How can SPW help?
If your adviser thinks it could be beneficial for your circumstances, they can refer you to a solicitor who will draft the document and provide legal advice if needed.
Depending on your intentions, it may be necessary to involve other beneficiaries in process. It may also be sensible for you to seek legal and tax advice to fully understand the implications of the Deed of Variation for you and the wider estate before you go ahead with it.
Is there a fee?
SPW does not charge for referring you to a solicitor for a Deed of Variation. The solicitor will charge a fee for the preparation of the Deed of Variation and any advice they provide in relation to it. They will agree this with you before going ahead.
Once the Deed of Variation is completed, if investment advice is needed then SPW’s usual advice fees would apply.
What if I change my mind?
Once signed, a Deed of Variation is legally binding and cannot usually be revoked.
Final thoughts
A Deed of Variation can be a tax-efficient way to pass on wealth in a way that reflects your values and priorities. Whether you’re supporting family, reducing your inheritance tax liability, or creating a trust, SPW is here to help guide you through.
Important information
This article is for information purposes only. It is not intended as investment advice.
Fees and charges may apply at SPW.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
The different scenarios referenced in this article are examples and what is right for each person will depend on individual circumstances.
Schroders Personal Wealth does not provide personal tax advisory and tax compliance, estate planning and administration, trust creation and management or will writing, however we can introduce you to a relevant specialist.
Schroders Personal Wealth might receive a referral fee from some of the partners we introduce to you.
