Trusts · 9 min read · Published
Deeds of Variation Explained: Redirecting an Inheritance
How a deed of variation lets beneficiaries redirect an inheritance after a death, the tax advantages and the strict two-year time limit.
By Aaron Johnson, Consultant Solicitor and TEP, a solicitor in Bridlington who writes every guide himself.
Guides · Trusts · No. 7 of 12Published · 9 minutes
Sometimes an inheritance does not land where it is most needed. The will may be years out of date, or the family may be able to save a large tax bill. A deed of variation lets the people who inherit redirect part or all of an inheritance after the death.
This guide explains what a deed of variation is, when it makes sense, the tax advantages and the strict two-year time limit.
What a Deed of Variation Is
In plain English: the people who inherit agree to change who gets what, after the death. The beneficiary giving up part of their inheritance signs a document redirecting it to someone else.
The useful part is the tax treatment. For inheritance tax and capital gains tax, HMRC treats the variation as though the person who died had made the gift. In effect the will is rewritten, which opens up tax planning that would not otherwise be possible.
Why Vary an Inheritance
Common situations where a deed of variation makes sense:
Passing to the next generation: a child who inherits from a parent may already have a large estate of their own. Redirecting the inheritance to their own children skips a generation and avoids the same assets being taxed twice.
Giving to charity: if at least 10% of the net estate goes to charity, the whole estate qualifies for the reduced inheritance tax rate of 36% instead of 40%. Sometimes a modest charitable gift produces a net saving for the family.
Correcting an outdated will: the person may not have updated their will after a marriage, divorce or the birth of grandchildren. A variation lets the family put that right.
Providing for someone the will missed: a dependant, carer or relative may have been left out. A variation is quicker and cheaper than a claim under the Inheritance (Provision for Family and Dependants) Act 1975.
Creating a trust for a vulnerable beneficiary: if a beneficiary is under 18, disabled or otherwise vulnerable, a variation can move their inheritance into a protective trust instead of paying a lump sum.
Evening out an unfair split: siblings or other beneficiaries may agree that the will's division was unfair and adjust it by consent.
The Two-Year Time Limit
This is the single most important point. The clock starts on the day of death, however long probate and the administration take. Families often only think about a variation after probate is granted, which can use up much of the time.
If you think a variation might help, get advice early, even if the estate is still being administered.
Tax Benefits of a Deed of Variation
The tax advantages can be large. The principle is 'reading back': HMRC treats the varied gift as if the person who died had made it in their will.
Inheritance tax: because the variation reads back, the redirected assets count as a gift from the person who died, not from the beneficiary. The beneficiary is not making a lifetime gift that needs to survive seven years. The tax is recalculated as if the will had always said what the variation says.
Capital gains tax: under section 62 of the Taxation of Chargeable Gains Act 1992, the person who receives the redirected assets is treated as acquiring them at probate value (the market value at the date of death). There is no capital gains tax on the variation itself.
The charity rate: if a variation sends at least 10% of the net estate to charity, the estate qualifies for the 36% rate instead of 40%. A charitable gift can cost the family very little, or even save them money overall.
Example: With and Without a Deed of Variation
| Without Variation | With Variation | |
|---|---|---|
| Child inherits the full £500,000 taxable estate | Child redirects £50,000 into a trust for the grandchildren, so it is not taxed again in the child's estate | |
| Inheritance tax at 40% on the amount above the nil-rate band | Tax recalculated as if the deceased had left £50,000 to the trust | |
| Assets added to the child's own estate for future inheritance tax | Redirected assets are outside the child's estate from day one | |
| No charity rate | If 10% or more goes to charity, the estate qualifies for the 36% rate | |
| Full capital gains tax exposure when the child eventually sells | The trust acquires the assets at probate value, a clean capital gains tax base cost |
How a Deed of Variation Works
The process is simple, but it must be done properly for HMRC to accept the tax treatment:
Steps to Complete a Deed of Variation
- Decide what to change and whyWork out which part of the inheritance to redirect, who should receive it and whether the tax saving justifies the cost. Advice is most useful at this stage.
- Get agreement from everyone giving something upEvery beneficiary who receives less must agree. Those who receive more do not need to sign.
- Have the deed draftedThe wording matters. The deed must identify the will or intestacy provisions being varied, say exactly what is redirected and to whom, and include the right statutory statements.
- Sign the deedThe deed must state that it is made under section 142 of the Inheritance Tax Act 1984, and under section 62 of the Taxation of Chargeable Gains Act 1992 if capital gains tax read-back is wanted too. Everyone giving up an entitlement signs.
- Tell HMRC if inheritance tax changesIf the variation increases the inheritance tax due, the personal representatives must send HMRC a copy within six months of signing. If it does not change the tax, nothing needs sending.
Who Needs to Agree
Only the beneficiaries giving up part of their inheritance need to consent. If you redirect your own share, nobody else's agreement is needed.
There are complications where a beneficiary cannot give valid consent:
Children under 18: a child cannot consent to a variation. If a child's share is being reduced, the court must approve, and it will only do so if the variation is clearly in the child's interests.
People who lack mental capacity: if a beneficiary cannot understand and agree to the variation, the Court of Protection's approval is normally needed, usually through their deputy. This needs careful handling.
Deeds of Variation vs Disclaimers
A deed of variation is sometimes confused with a disclaimer. They work differently:
Variation vs Disclaimer
| Deed of Variation | Disclaimer | |
|---|---|---|
| You choose who receives the redirected assets | You give up your share and do not choose who gets it | |
| Can redirect to any person, trust or charity | The assets pass as if you had died before the deceased, under the will or the intestacy rules | |
| You control where the inheritance goes | Simpler, but far less control | |
| Must be in writing and refer to section 142 of the Inheritance Tax Act 1984 | No statutory reference needed | |
| Can be made after you have received the assets | Must be made before you accept any benefit from the inheritance |
A deed of variation is usually the better option because you control where the assets go. A disclaimer only suits a case where you are happy for the assets to pass under the existing will or intestacy rules.
When a Deed of Variation Is the Wrong Tool
A variation is also the wrong tool where there is a real dispute. It needs willing agreement from everyone giving something up and cannot be imposed. If the family is in conflict over the estate, mediation or a claim under the Inheritance Act may be more suitable.
Getting Help in East Yorkshire
If someone has died and you think a deed of variation could help your family, for tax or to put things right, act promptly. The two-year deadline is absolute and the deed takes time to get right.
Aaron advises families across East Yorkshire on deeds of variation, inheritance tax and trusts. He will say plainly whether a variation makes sense in your situation, draft the deed and notify HMRC. His fee for a deed of variation is fixed and shown on the fees page.
Written by Aaron Johnson, Consultant Solicitor and TEP · Law of England and Wales as at 21 March 2026 · Ends