Changing a Will After Death: How Deeds of Variation Can Cut IHT

Estate Planning Doesn’t Always End at Death

Creating a will is a critical part of any estate plan. It ensures your assets are distributed according to your wishes and can help reduce the inheritance tax (IHT) bill, which is charged at 40% on estates above the nil-rate band. But what happens if the will no longer reflects what’s best for the family or isn’t tax-efficient at the time of death?

Interestingly, while you can’t change a will in the traditional sense once someone passes away, there are legal tools that allow beneficiaries to alter how an estate is distributed. These tools—disclaimers and deeds of variation—can create a ‘tax fiction’, letting families reshape inheritances to reduce tax liabilities after death.

Can a Will Be Changed After Death?

The answer is both no and yes.

You cannot legally change the terms of a will after the testator (the person who made the will) has died. However, for inheritance tax and capital gains tax purposes, certain changes made by the beneficiaries are treated as if the deceased made them. This is where disclaimers and deeds of variation come in.

What is a Disclaimer?

A disclaimer is when a beneficiary chooses not to accept a gift left to them in the will. They don’t get to say who should get it instead—it simply passes on to the next person named in the will or, if not specified, follows the rules of intestacy.

Example: James was left a holiday home in his brother Peter’s will. Already owning a similar property, James decided to disclaim the inheritance. The gift was then passed to the next beneficiary in line as stated in the will.

What is a Deed of Variation?

Unlike a disclaimer, a deed of variation allows a beneficiary to redirect their inheritance to someone else. This could be another family member, a friend, a trust, or even a charity. The key point is that the new recipient does not have to be someone named in the original will.

If certain conditions are met, the law treats the new arrangement as if the deceased made the gift directly to the new recipient. This is where the ‘tax fiction’ is created.

Example: Helen’s will left half of her investment portfolio to each of her two daughters, Barbara and Susan. After Helen’s death, Susan decided to pass her share to their father, who was struggling financially. She executed a deed of variation to redirect her inheritance. For tax purposes, it’s as though Helen had given the money to her husband directly, which means no inheritance tax was due on that share due to the spouse exemption.

Tax Advantages of a Deed of Variation

Inheritance Tax (IHT) Relief

If a variation redirects an asset to a spouse or charity, inheritance tax on that portion can be reduced or eliminated entirely. For example:

• Transferring to a spouse qualifies for full exemption.
• Gifts to charities are also tax-free and can even reduce the overall IHT rate if a sufficient portion of the estate is donated.

Capital Gains Tax (CGT) Planning

When a deed of variation is used, the recipient is treated as if they had inherited the asset directly from the deceased rather than receiving it as a gift from another beneficiary. This means the asset is acquired at its probate value, potentially lowering any CGT due on future sales.

Conditions for a Valid Deed of Variation

To ensure the variation is recognised for tax purposes, it must meet these conditions:

1. Time Limit: It must be made within two years of the date of death.
2. Written Form: It must be documented in writing.
3. No Payment or Consideration: The change cannot involve any form of compensation or payment.
4. Consent of All Affected Parties: Everyone whose inheritance is affected by the change must agree and sign the document.
5. Clear Tax Statement: The variation must include a statement indicating that it is intended to be effective for inheritance and/or capital gains tax purposes.

Strategic Uses of a Deed of Variation

• Help struggling family members by redirecting assets to those in greater financial need.
• Equalise inheritances where a will is outdated or doesn’t reflect current family relationships.
• Create or fund a trust to control how and when beneficiaries receive assets.
• Support younger generations directly through skipped-generation gifting.
• Boost charitable giving and reduce overall tax rates on the estate.

What About Disclaimers?

Disclaimers are simpler but less flexible. You can reject an inheritance, but you don’t get to control where it goes. It’s only useful if you’re happy to step aside and let the next-in-line beneficiary receive the asset according to the will.

Limitations and Cautions

• Not All Tax Types Covered: These variations don’t affect income tax or stamp duty land tax.
• Cannot Reverse: Once a deed of variation is made, it cannot be undone.
• Court Involvement for Minors: If a beneficiary under 18 is affected, a court must approve the variation.
• Complete Consent Required: Without the agreement of all impacted parties, the variation cannot proceed.

Estate Planning Isn’t Over When Life Ends

A will is important for explaining what happens to your property after you die. However, you can also make changes later through disclaimers and deeds of variation. This gives families flexibility. It lets beneficiaries update old instructions, adapt to new situations, and reduce tax costs.

When used properly and within the rules, these options can save families a lot of money and help maintain the deceased’s legacy in a tax-efficient manner.

Need Expert Help Planning Your Estate?

At Tax Accountant, we help families and individuals make smart tax decisions before and after death. Whether you need help drafting a will or navigating post-death tax planning, our experts are here to guide you every step of the way. Book a consultation today and protect your family’s future.