Deed of variation: how to change who inherits from an estate in the UK

What is a deed of variation?

A deed of variation is a written document signed by a beneficiary who chooses to pass part or all of their inheritance to a different recipient. It is sometimes called a deed of family arrangement or an instrument of variation.

A deed of variation does not rewrite the will. The original will stays valid, and the deed sits alongside it, recording the beneficiary's decision to vary their own entitlement.

You can also use a deed of variation where there is no will, to redirect what you would receive under the intestacy rules.

This guide covers deeds of variation in England and Wales. The rules differ in Scotland and Northern Ireland.

How does a deed of variation to a will work?

A deed of variation to a will changes where one beneficiary's share goes, without touching the rest of the will. The executors still administer the estate under the original will, and every other gift in it is unaffected.

The key point is who is treated as making the gift. Without a deed, if you inherit and then give the money away, that is your gift, and it counts as a transfer from you. With a valid deed of variation, the redirected gift is treated as coming from the person who died, not from you.

How long do you have to make a deed of variation?

A deed of variation must be signed by everyone involved within 2 years of the date of death (GOV.UK, Change a will after a death). The 2 years includes the anniversary of the death itself, and there is no discretion to extend it (HMRC, Inheritance Tax Manual IHTM35024).

A deed signed after that window can still work as a straightforward gift, but it loses the special tax treatment set out below.

The clock runs from the date of death, not from the grant of probate, so decide early whether a variation might help. A full picture of the estate takes time to build, and our guide on how to value an estate for probate explains what that involves.

How does a deed of variation affect inheritance tax and capital gains tax?

A valid deed of variation is read back to the date of death, so the redirected gift is treated as coming from the deceased's estate rather than from the beneficiary who gave it up. You only get that treatment if the deed says so in plain terms.

For inheritance tax, section 142 of the Inheritance Tax Act 1984 lets the redirected gift be read back to the date of death, as if the deceased had left it directly to the new recipient. The deed must include an express statement that section 142 is to apply.

For capital gains tax, section 62(6) of the Taxation of Chargeable Gains Act 1992 does the same, treating the redirection as made by the deceased. This needs its own separate statement in the deed, and the two elections are independent. Where the asset is a property, the later sale is a separate question, covered in our guide to capital gains tax on inherited property.

The rules and deadlines in one place:

• Deadline to sign the deed: 2 years, from the date of death

• Inheritance tax reading back: section 142, Inheritance Tax Act 1984, express statement required

• Capital gains tax reading back: section 62(6), Taxation of Chargeable Gains Act 1992, separate statement required

• Deadline to notify HMRC: 6 months from the date of the deed, only where the tax increases

Because the gift is treated as coming from the estate rather than from you, the 7 year rule for inheritance tax that applies to lifetime gifts does not bite on the person redirecting the inheritance.

Why do families use a deed of variation?

Families most often use a deed of variation to skip a generation, to use a couple's inheritance tax allowances better, or to reach the charity threshold that cuts the rate.

To skip a generation. A beneficiary who does not need the money can redirect it to their own children or grandchildren. Because the gift is treated as the deceased's, it does not sit in the redirecting beneficiary's estate for inheritance tax.

To preserve allowances across a couple's estates. If a will wastes the first person's nil rate band or the residence nil rate band, a variation can redirect assets to use those allowances better on the second death. The standard nil rate band is £325,000 and is frozen until April 2031.

To support a charity and reduce the rate of tax. If at least 10% of the net estate passes to charity, the inheritance tax rate on the rest of the estate drops from 40% to 36%. A deed of variation can be used to reach that 10% threshold.

To rebalance or provide for someone who was left out. Beneficiaries sometimes agree to even up shares, or to provide for a family member the will did not cover.

For the wider tax position, our guide to the inheritance tax threshold sets out the current rules.

Do all beneficiaries have to agree to a deed of variation?

No. Only the beneficiaries whose shares are reduced by the change have to agree and sign the deed. Nobody can be forced to give up part of their inheritance, whatever other family members expect.

Everyone signing must have the mental capacity to understand what they are doing. A beneficiary who is under 18 or who lacks capacity cannot agree on their own behalf, and a parent cannot simply sign for them. In those cases the court's approval is needed, which adds time and cost.

The executors or administrators usually do not need to be parties to the deed. They only sign where the variation increases the amount of inheritance tax due, or where it affects how the estate is administered. Our guide to what an executor of a will does covers the rest of that role.

What can a deed of variation not do?

A deed of variation cannot rewrite the whole will, cannot increase your own entitlement, and cannot involve any payment in return.

• It cannot rewrite the will. A deed of variation cannot change who the executors or guardians are.

• It cannot increase your share. A deed of variation only redirects what you already receive.

• It cannot involve payment. The variation has to be a genuine gift. If money or anything of value changes hands in return, the tax treatment is lost and it becomes your own gift instead.

• It cannot cover assets you no longer hold. A deed of variation cannot redirect assets you have already sold or given away.

• It cannot be used to dodge obligations. Redirecting an inheritance to avoid care fees or a means-tested benefits assessment can be treated as deliberate deprivation of assets.

Do you have to tell HMRC about a deed of variation?

You only have to send a deed of variation to HMRC where the variation increases the amount of inheritance tax payable. A variation that leaves the tax position unchanged, or reduces the tax due, does not have to be notified.

Where notification is required, the deed must reach HMRC within 6 months of the date the deed was made (GOV.UK, Change a will after a death). That 6 month notice period is separate from the 2 year deadline for making the deed.

HMRC publishes an Instrument of Variation checklist (IOV2), which you can use to check that a deed meets the conditions. Even where no notification is needed, keep signed copies with the estate records.

Do you need a solicitor to make a deed of variation?

There is no legal requirement to use a solicitor, but for anything beyond a simple redirection it is sensible to have the deed drawn up by one. A deed that misses the section 142 statement does not get the inheritance tax treatment. Solicitor fees vary between firms, so it is worth asking for a fixed quote before instructing one. The Law Society's Find a solicitor service lists firms by specialism.

This guide is general information, not legal or tax advice. For your own circumstances, speak to a solicitor or a qualified tax adviser.