Deed of Variation After Death: Redirecting an Inheritance

A deed of variation (sometimes called a deed of family arrangement) is a powerful but often overlooked estate planning tool. It allows the beneficiaries of a deceased person's estate to redirect — in whole or in part — what they have inherited to other beneficiaries, to charity, or into trust, and to do so as if the redirection had been made by the deceased. The tax implications of the variation are then read back into the estate, potentially reducing the inheritance tax (IHT) and other tax charges that would otherwise apply.

For internationally mobile families, where assets may be spread across jurisdictions and where family members may be in different tax positions, a deed of variation can be a highly effective post-death planning tool. However, it is subject to strict conditions, a two-year deadline, and must be properly documented. This article explains how it works, when it is appropriate, and what the limitations are.

What Is a Deed of Variation?

A deed of variation is a legal document entered into by one or more beneficiaries of a deceased person's estate (whether under a will or under the intestacy rules) by which they redirect some or all of their entitlement to another person, to charity, or into a trust. The key legal provision is in section 142 of the Inheritance Tax Act 1984 (for IHT purposes) and section 62 of the Taxation of Chargeable Gains Act 1992 (for CGT purposes).

Provided the conditions are met, the variation is treated as if the deceased had made the redirection themselves — the estate is recalculated on the basis of the varied terms, and the IHT (and, where elected, CGT) position is assessed accordingly.

Conditions for a Valid Deed of Variation

To qualify for the tax benefits, the deed of variation must:

1. Be made within two years of the date of death. There is no power to extend this deadline; late variations do not attract the tax benefits.

2. Be in writing — oral variations do not qualify.

3. Be signed by all the beneficiaries whose entitlement is being reduced by the variation. If a beneficiary is a minor, a court order may be required to authorise their participation.

4. Include a statement (where IHT benefits are sought) that the variation is intended to have effect for IHT purposes under section 142 IHTA 1984.

5. Not be made for valuable consideration — the beneficiary redirecting the inheritance must not receive money or other consideration for doing so. A variation in exchange for a payment from the person receiving the redirected assets is not effective for the statutory tax benefits.

6. Not involve a further variation of a variation that has already been made. Once an asset has been subject to a deed of variation, it cannot be re-varied with the tax benefits applying.

A separate election is required for CGT purposes if the variation is also to be treated as if made by the deceased for CGT. Both the person making the variation and the personal representatives must sign the CGT election; it is not automatic.

The Two-Year Deadline

The two-year window is measured from the date of death, not from the date of grant of probate. This is an important distinction: many families do not begin thinking about post-death planning until probate has been obtained, by which time months may have elapsed. Families should consider whether a deed of variation is appropriate at the earliest opportunity after death.

In practice, the two-year deadline is often approached without sufficient planning. A variation made in the final weeks before the deadline — with estates not fully administered — can be complex to execute. Early advice, ideally within the first six to twelve months, is strongly recommended.

What Can Be Achieved by a Deed of Variation?

IHT Reduction

The most common use is to reduce the IHT liability on the estate by redirecting assets in a more tax-efficient direction. Common examples:

Redirecting to a spouse or civil partner: if the deceased left assets to children instead of a surviving spouse (for example, under an old will), a variation can redirect them to the spouse — who is entitled to the unlimited spouse exemption — and eliminate the IHT charge on those assets. The NRB can then be preserved for use on the second death.

Redirecting to children (skipping a generation): if an adult child has a substantial estate of their own and does not need the inheritance, redirecting it directly to grandchildren can reduce the IHT exposure in the child's own estate. The grandchildren receive the assets "as if" they came from the grandparent's estate, avoiding a second IHT charge when the child eventually dies.

Redirecting to charity: the entire residue or specific assets can be redirected to a qualifying charity, with the full charitable exemption applying. The estate also benefits from the reduced IHT rate of 36% (rather than 40%) if at least 10% of the net estate is left to charity after the variation.

Feeding the nil rate band: assets can be redirected to use the nil rate band (and residence nil rate band) that would otherwise be wasted, ensuring the full statutory exemptions are used on the first death.

Creating a Trust

A variation can redirect assets into a discretionary trust or other trust structure. This allows ongoing flexibility — the trustees can then distribute to beneficiaries as appropriate over time, potentially in a more tax-efficient manner. This is particularly useful where beneficiaries are minor children or young adults who should not receive large sums immediately.

Correcting or Updating a Will

A will may be outdated — written when the family's financial position or family structure was different. A deed of variation can effectively update the distribution without altering the will itself. For example, if the will leaves equal shares to three children but one child has since become very wealthy while another is in financial difficulty, the siblings can agree a variation to reflect current circumstances.

CGT Planning

If the CGT election is made, the variation also resets the base cost of assets for CGT purposes to the market value at death (the date of death value). This can be valuable where assets have appreciated since death, as it avoids a CGT charge on the gain between death and the date of variation.

Limitations and Pitfalls

Minor Beneficiaries

Where a beneficiary whose entitlement is being reduced is a minor, the court's approval (via the Variation of Trusts Act 1958 or under the court's inherent jurisdiction) is generally required. This adds time, cost, and uncertainty to the process.

Beneficiaries Who Cannot Agree

All beneficiaries who are losing an entitlement must consent. If one beneficiary refuses or is unwilling to participate (for any reason), their share cannot be varied without their consent. In contentious family situations, this can prevent beneficial variations from proceeding.

Foreign Law

A deed of variation is a UK legal concept. Its effect on assets situated in foreign jurisdictions — overseas property, foreign bank accounts, investments held abroad — is not guaranteed. Local legal advice should be sought on whether the variation is recognised in each relevant jurisdiction.

For internationally mobile families with assets in civil law countries (France, Spain, Germany), local forced heirship rules may operate independently of any UK deed of variation. Redirecting an inheritance in the UK does not automatically override local inheritance laws in another country.

The Consideration Rule

A variation that involves any payment of consideration — money in exchange for the redirect — does not qualify for the tax benefits. This can arise inadvertently, for example where a beneficiary agrees to vary in exchange for other family arrangements. Legal advice to ensure the transaction is properly structured is essential.

HMRC Scrutiny

HMRC has the power to challenge variations that it considers to be artificial or to not represent genuine changes to the distribution of the estate. In practice, most commercially motivated variations by genuinely consenting beneficiaries are accepted, but any unusual arrangements should be discussed with a specialist tax adviser in advance.

Practical Steps

1. Act early: consider whether a variation is appropriate as soon as possible after death — ideally within the first year.

2. Take stock of the estate: identify the assets, their values, and the current IHT position. Model the effect of proposed variations before proceeding.

3. Check all beneficiaries can consent: identify any minors, mentally incapacitated individuals, or uncontactable beneficiaries who might be affected.

4. Obtain professional advice: a deed of variation should be drafted by a solicitor experienced in private client and estate planning work. The tax consequences should be reviewed by a tax adviser.

5. Determine whether the CGT election is needed: in many cases it will be beneficial, but where assets have fallen in value since death, the CGT election may produce a worse result. Analysis is required.

6. Execute and notify: once signed, the deed of variation should be sent to the personal representatives and, where IHT or CGT elections are included, to HMRC within the required timeframe.

Interaction with International Estate Planning

For families spread across multiple jurisdictions, a deed of variation in the UK can be part of a broader international estate planning exercise following a death. For example:

• A UK national who dies while living in France may have UK assets subject to UK IHT and French assets subject to French succession rules. A deed of variation can address the UK assets; French succession planning requires separate advice.
• Where the deceased was within the new long-term residence tail period, a variation can potentially optimise the IHT position by redirecting assets to the surviving spouse or children to maximise reliefs.
• Where UK inheritance is received by a non-UK resident beneficiary, local tax advice in the beneficiary's country of residence is needed — some countries tax inheritances received by residents.

How Global Investments Can Help

A deed of variation is one of the most cost-effective post-death planning tools available to families, yet it is consistently underused — often because families do not seek advice promptly enough after a death, or because advisers do not raise it proactively. At Global Investments, we ensure that our clients and their families are aware of the opportunity and are supported through the process.

We can help you to:

• Assess whether a deed of variation is appropriate and model the tax savings.
• Coordinate with solicitors and tax advisers to ensure the deed is correctly drafted and executed.
• Address the position of UK assets within a broader international succession context.
• Ensure the two-year deadline is met and compliance obligations are fulfilled.

If you have recently experienced a bereavement in the family and the estate involves UK assets or tax exposure, please contact us promptly. Time is the critical constraint in this area. Tax rules change and all information in this guide reflects the position as of 2026; seek professional advice tailored to your individual circumstances.