Deed of Variation: Complete Guide to Redirecting an Inheritance

What is a deed of variation?

A deed of variation (also called a deed of family arrangement or instrument of variation) is a legal document by which a beneficiary redirects their inheritance to someone else. The key feature is that, for IHT and CGT purposes, the variation is treated as having been made by the deceased at the date of death — not as a gift by the redirecting beneficiary.

This retrospective treatment is the primary tax advantage. Without a deed of variation, if a beneficiary simply gave away part of their inheritance after receiving it, that gift would be a potentially exempt transfer (PET) from the beneficiary's estate — potentially taxable if they die within 7 years. A deed of variation removes this problem.

The 2-year deadline

The variation must be made within 2 years of the date of death. This is an absolute deadline set by section 142 of the Inheritance Tax Act 1984 and section 62 of the Taxation of Chargeable Gains Act 1992. There is no power to extend it, regardless of circumstances.

In practice, this means the variation should be identified and executed as soon as possible after the death — ideally before the estate is distributed. A variation can be made to assets that have already been distributed to the original beneficiary, but it is simpler to do before distribution.

HMRC notification requirement

If the variation results in more IHT being payable, HMRC must be notified within 6 months of the variation being made. In practice, this means:

• If the variation reduces the IHT payable (the most common reason for a variation), you do not have to notify HMRC — though you can choose to do so and HMRC recommends notification for certainty
• If the variation increases the IHT payable, HMRC notification within 6 months is mandatory
• The variation instrument should include a statement that it is intended to have IHT and/or CGT effect under s.142 IHTA 1984 / s.62 TCGA 1992

Formal requirements

A valid deed of variation must:

• Be in writing
• Identify the dispositions being varied (the original gifts or the intestacy entitlement)
• Identify who the assets are being redirected to
• Be signed by the redirecting beneficiary (the original recipient)
• Include the election for IHT/CGT treatment (a statement that it takes effect under s.142 IHTA 1984 and/or s.62 TCGA 1992)
• If IHT is being redirected: be signed by the personal representatives as well (to confirm that the IHT position is acceptable to the estate)

It does not need to be witnessed or notarised, but it is good practice to have it witnessed. A solicitor experienced in wills and probate should draft the deed.

Common uses for a deed of variation

Deeds of variation are most commonly used to:

Deed of variation vs disclaimer

A deed of variation is different from a disclaimer. With a disclaimer, a beneficiary refuses the gift entirely — it then falls back into the residue of the estate and is distributed according to the will or intestacy. A disclaimer cannot direct where the gift goes.

With a deed of variation, the beneficiary chooses who to redirect to. This is more flexible. The choice depends on whether the beneficiary has a specific person or charity in mind. See our disclaimer of inheritance guide for more on the disclaimer option.

IHT saving example

Consider an estate of £1.5m where the entire estate passes to the deceased's adult child. The child's own estate is also substantial. If the child accepts the full inheritance, it will eventually be taxed again on their death at 40%.

If instead the child executes a deed of variation redirecting £500,000 to their own children (grandchildren of the deceased), that £500,000 passes free of IHT at the grandchildren's level (subject to their own NRB). The deed of variation treats this as a direct gift from the original deceased to the grandchildren — no gift from the child occurs for IHT purposes.

For the full IHT context, see our inheritance tax UK 2026–27 guide.

Practical steps

1. Assess the estate and the beneficiaries' positions— consider whether any beneficiary has a taxable estate that a variation could reduce
2. Act within 2 years of death — do not delay; the deadline is absolute
3. Instruct a probate solicitor to draft the deed — it must be legally correct to achieve the desired tax treatment
4. Include the necessary elections in the deed
5. Notify HMRC if required — within 6 months of the variation
6. Update the estate accounts to reflect the varied distribution

For the full probate process, see our complete UK probate guide 2026 and estate administration checklist. Farra can help you understand what needs to happen after a death — get started here.

Related Guides

• Charitable Legacy to Reduce IHT to 36%
• Transferring the Nil Rate Band Between Spouses
• Gifting Strategy 2025/26: What Still Works
• IHT400 Form Guide
• Executor Final Accounts
• Distributing Cash to Beneficiaries
• IHT Planning Checklist 2025/26