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.
This guide is general information about the law of England and Wales, not legal advice. Each case is assessed on its own merits.
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 The will may be years out of date, or the family may save a large tax bill.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 inheriting from a parent may already have a large estate. 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 estate's 'baseline amount' goes to charity, some or all of the estate qualifies for the reduced inheritance tax rate of 36% instead of 40%. The baseline amount is broadly the estate's value after debts, reliefs and other exemptions, less the nil-rate band. The charity gift is then added back. The residence nil-rate band is not deducted. Where the will already leaves a sizeable gift to charity, topping it up to 10% can sometimes leave the family better off.
Correcting an outdated will: it may not have been updated after a marriage, divorce or the birth of grandchildren.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 usually quicker and cheaper than a claim under the Inheritance (Provision for Family and Dependants) Act 1975. A claim under that Act must normally be made within six months of the grant of probate or letters of administration. Waiting for the family to agree a variation does not stop that clock.
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. Read-back works for inheritance tax and capital gains tax, if the deed contains the right statements. It does not work for income tax. Say a parent redirects an inheritance into a trust for their own children under 18. If more than £100 of income a year is paid to or for a child, all of that income can be taxed as the parent's.
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: if the deed includes a statement under section 62(7) 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 then no capital gains tax on the variation itself. Without that statement, a beneficiary who gives up assets that have risen in value since the death may owe capital gains tax on the rise.
The charity rate: if a variation sends at least 10% of the estate's baseline amount to charity, inheritance tax on some or all of the estate is charged at 36% instead of 40%. The charity must be told about the variation, or the read-back does not apply. A charitable gift usually costs the family much less than its face value, and topping up an existing one can sometimes save them money.
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 of the baseline amount goes to charity, some or all of the estate qualifies for the 36% rate |
| If the child later passes the assets on, that is a disposal for capital gains tax | With a section 62(7) statement, the trust takes the probate value as its base cost and the child makes no disposal |
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 and who should receive it. Check 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. If the variation means more inheritance tax is due, the personal representatives must also join in the section 142 statement. They can refuse only if they do not hold enough assets to pay the extra tax.
- 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, no other beneficiary needs to agree. If the variation means more inheritance tax is due, the personal representatives must also join in the section 142 statement.
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 must authorise any variation that gives away part of their share. A deputy or attorney cannot do this on their own authority.
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. Read-back applies only to inheritance tax and capital gains tax. A council assessing care fees, or the DWP assessing benefits, may treat a beneficiary who gives up an inheritance as still having it. If that beneficiary is later made bankrupt, the gift can sometimes be reversed.
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.
Sources
The official pages behind the rules this guide explains. Each was checked on .
Written by Aaron Johnson, Consultant Solicitor and TEP · Law of England and Wales as at 21 March 2026 · Ends
