A deed of variation is a way of redirecting your inheritance under a Will or intestacy. It is also an excellent vehicle for inheritance tax (IHT) and capital gains tax (CGT) mitigation. If you have received an inheritance within the last two years that you do not need or want, you have an opportunity to make a tax efficient gift to your own intended beneficiaries.
If you do this the orthodox way, by making a simple gift, it would be deemed a gift from you (from an IHT perspective) and could have inheritance tax consequences for your estate.
If, instead, you make the same gift using a deed of variation, then the gift takes effect from the deceased person (rather than you) from an IHT and CGT perspective (if this is desired). This could reduce your estate’s IHT bill or even your lifetime CGT liability.
Such documents routinely save families hundreds of thousands of pounds.
But tax saving is not the only reason to complete a deed of variation. They are also useful if the beneficiaries of a Will decide that they would like to alter the distribution of an estate. This could be, for instance, because a family member has been omitted as a beneficiary.