Legal News | 3.09.26

Deeds of Variation: Redirecting an Inheritance

When an individual dies, their estate is distributed according to the terms of their Will (or the intestacy rules). However, beneficiaries do not always have to accept an inheritance exactly as it is left to them.

A beneficiary can redirect all or part of their inheritance to, for example, an unmarried partner, their children, grandchildren, other family members, or even into a trust rather than accepting the entitlement personally. To vary their entitlement, the variation must be expressed in writing (commonly by deed) and completed within two years of the deceased’s death.

A straightforward variation might see a beneficiary’s children receive a fixed sum from their entitlement or a percentage share of their entitlement. An alternative might be a gift to charity; depending on the value of which, the deceased’s estate might consequently benefit from a lower rate of inheritance tax. More complex variations can be used to redirect assets into a trust fund rather than to individuals directly, which can offer greater flexibility and longer-term estate planning opportunities.

A principal advantage of varying a Will, is the inheritance tax treatment of the redirected gift.  The redirected gift is treated for inheritance tax purposes as having been made directly by the deceased rather than by the beneficiary personally.

Varying a Will by deed can therefore be especially useful as a tax planning measure, either for the deceased’s estate and or for the individual beneficiary. Where, for example, a beneficiary is considering making gifts out of their inheritance (for example, to help a child purchase their first home), as the redirected gift is not treated as a lifetime gift made personally by the beneficiary, it does not form part of the beneficiary’s own estate for inheritance tax purposes and therefore the ‘7 year rule’ is not relevant.

If you are a beneficiary of an estate and are considering varying your inheritance, or if you would like to discuss your estate and inheritance tax planning more generally, please contact the Private Client Team at Wansbroughs on wealth@wansbroughs.com.