When someone dies, most people assume the terms of their Will are fixed. In fact, the law gives beneficiaries in England and Wales a meaningful window to rearrange who receives what, sometimes in a way that can significantly reduce the future tax burdens for the beneficiaries named in the will.
Knowing what is a deed of variation, and when it applies, can make a real difference to the outcome for families dealing with an estate. It is one of the most useful but least understood tools in estate planning, and it can be used in both circumstances where the deceased left a Will, or died intestate without one.
If you require support today, please get in touch with our expert private client team at DW Harris.
What Is a Deed of Variation?
A deed of variation, sometimes called a deed of family arrangement or instrument of variation, is a legal document that allows a beneficiary to redirect all or part of their inheritance to someone else after the death has occurred. A common deed of variation example would be an adult child who inherits from a parent but chooses to pass that inheritance directly to their own children instead.
Rather than accepting what the will (or the intestacy rules) awards them, the beneficiary named in the Will can redirect their share to a different person, a trust, or a charity.
Provided the deed is drawn up correctly and within the required time frame, HMRC treats the redirected gift as though it had been made by the deceased directly. This "reading back" effect is what gives the deed its tax planning power. If you are asking what a deed of variation in practical terms is, this tax treatment is its most important feature.
When You Might Use a Deed of Variation
Deeds of variation are used for a wide range of reasons, and not all of them are purely about tax.
Skipping a generation
A parent who inherits from a grandparent may already have sufficient wealth of their own. Rather than taking the inheritance now, and potentially facing inheritance tax on it again when they die, they can redirect it straight to their own children, removing it from their estate entirely.
Providing for someone left out of the Will
A Will may have been made years before a death and may no longer reflect the family's circumstances. A partner, a carer, or a child born after the will was written may have been overlooked. A deed of variation can address this, provided the beneficiaries who already inherit are willing to reduce or give up a share.
Equalising shares or redirecting to charity
Where siblings have received unequal shares by accident of drafting, a variation can bring things into balance without the need for inheritance disputes. Redirecting part of an inheritance to a qualifying charity can also reduce the estate's overall IHT liability.
A deed of variation can also be used where there is no Will. If someone has died intestate, beneficiaries under the intestacy rules can redirect their entitlement in exactly the same way.
Who Can Make a Deed of Variation?
Only adult beneficiaries with full mental capacity can give up or redirect their own share. A beneficiary cannot vary someone else's entitlement; they can only deal with what they themselves stand to receive. Where a minor's share is affected, court approval is required before the deed can be executed. All beneficiaries impacted by the variation must consent and sign.
It is also worth noting the limits of what a deed can achieve: it cannot give a beneficiary more than they were entitled to, override rules of forfeiture, or reverse a disclaimer already made. Once signed, it is irrevocable. It does not change the original Will but operates alongside it, redirecting entitlements that arose under it.
The Deed of Variation Time Limit
This is the detail that catches families out most often. Under section 142 of the Inheritance Tax Act 1984 and section 62(6) of the Taxation of Chargeable Gains Act 1992, a deed of variation must be made within two years of the date of death to receive favourable tax treatment. The window runs from the date of death, not from the grant of probate.
A deed of variation after 2 years loses its tax advantages and is treated as a gift from the original beneficiary, which may trigger CGT and is often a potentially exempt transfer for IHT with tax consequences should the original beneficiary die within seven years of the deed being executed.
How a Deed of Variation Affects Tax
The inheritance tax advantages are the main reason most families consider this route. The principal benefit is the "reading back" effect for inheritance tax purposes: HMRC treats the redirected gift as though it came directly from the deceased, so it does not count as a transfer by the original beneficiary and their own nil-rate band is unaffected.
Redirecting assets to a surviving spouse or civil partner can eliminate IHT on that portion entirely; redirecting to a charity uses the charitable exemption.
The deed of variation tax implications extend beyond IHT. The CGT rules work in parallel: any gain on a redirected asset is treated as accruing to the estate at the date of death rather than to the original beneficiary.
Where a deed changes the amount of IHT or CGT payable, it must contain a specific statutory declaration to that effect; without it, the reading-back treatment does not apply. Note that the reading-back rules do not extend to income tax, which can have implications where assets are redirected into a trust.
For further guidance, GOV.UK's page on altering a Will after a death is a useful starting point.
The Process, Timeframe and Cost
Once all affected parties have agreed, a solicitor drafts the deed, including the required statutory declarations where tax is involved. The deed is then executed and witnessed by all relevant parties, and the estate administration records are updated.
A straightforward variation typically takes four to six weeks from instruction. The deed of variation cost very much depends on the complexity, but for simply cases can be as little as £500 plus VAT. Our team is happy to provide a tailored quote.
Can You Do a Deed of Variation Yourself?
Many people ask whether they can do a deed of variation yourself using an online template. While templates exist, the risks of proceeding without professional guidance are significant. A missing or incorrectly worded statutory declaration means the deed does not read back for IHT or CGT purposes, potentially generating a tax bill that proper advice would have avoided.
Other pitfalls include failing to bind all affected parties or inadvertently creating an unintended trust. Where property, shares, business interests, or trusts are involved, professional advice is strongly recommended; the cost is generally a fraction of the tax saving a well-drafted deed can achieve.
Talk to David W Harris & Co About a Deed of Variation
The pros and cons of deed of variation arrangements are worth weighing carefully before proceeding. On the positive side, a deed offers genuine tax efficiency, flexibility, and the ability to provide for family members who were overlooked.
When considering deed of variation use, it is important to remember that for effective deed of variation, all affected beneficiaries must agree, it must be completed within two years of the death, and once signed it cannot be undone.
If you are wondering whether a deed of variation could benefit your family, our Wills and probate team at David W Harris & Co Solicitors would be glad to help. We will take the time to understand your circumstances and advise on whether this is the right approach for your situation.
We work with families across South Wales from our offices in Pontypridd, Swansea and Talbot Green. To arrange a confidential conversation, please get in touch. We look forward to hearing from you.
