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Deed of Variation

Also known as: Deed of Family Arrangement, Post-Death Variation

Definition

A deed of variation is a legal document that allows beneficiaries to redirect their inheritance within two years of someone's death, treating the change as if the deceased had made it themselves.

This tool is crucial for post-death tax planning and addressing changed family circumstances the original will didn't anticipate.

What Does Deed of Variation Mean?

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 allows beneficiaries to alter estate distribution after death. The "reading back" provision means when made within two years with proper wording, it's treated as if the deceased made the change. This applies to both wills and intestacy. The person making it must be sui juris (an adult of sound mind) and absolutely entitled (having full legal ownership).

The deed must be in writing within two years of death. It doesn't need to be formal—a letter meeting statutory requirements works. The beneficiary redirecting their inheritance must sign, plus any beneficiaries whose shares are affected. Executors only sign if the variation increases tax liability. Since 1 August 2002, documents must include this statement: "The parties to this variation intend that the provisions of section 142(1) Inheritance Tax Act 1984 and section 62(6) Taxation of Chargeable Gains Act shall apply." The person redirecting cannot receive consideration (payment or benefit).

Sarah inherits £200,000 from her father but is financially secure. She uses a deed of variation to redirect it to her two adult children (£100,000 each). For tax purposes, it's treated as if Sarah's father left money directly to his grandchildren. When Sarah dies, these assets won't be taxed again, potentially saving £80,000.

You cannot use a variation to increase your inheritance or take from others—only to give up your entitlement. Once made, it cannot be revoked. If a beneficiary is under 18 or lacks capacity, a court order is required. You must make it before receiving the inheritance. You cannot deliberately deprive yourself of assets to qualify for means-tested benefits—the DWP will treat you as still possessing them, which could constitute fraud.

Common Questions

"Can I use a deed of variation to give my inheritance to my children?"

Yes, this is one of the most common uses. If you've inherited but don't need the money, you can redirect it to your children within two years of death. It's treated as if the deceased left it directly to them, potentially saving inheritance tax by skipping a generation.

"Do I need to tell HMRC if I make a deed of variation?"

You only need to notify HMRC if the variation increases inheritance tax payable, and you must do so within six months. If it reduces tax or has no impact, no notification is required. Solicitor fees typically range from £400 to £1,250, but there's no government fee.

"Can I make a deed of variation if I've already received my inheritance?"

A variation must be made before you receive the inheritance you're redirecting. If you've already taken possession, it's too late for favorable tax treatment. However, if the inheritance is still held by executors, you can make a valid variation within two years.

Common Misconceptions

Myth: A deed of variation needs to be officially registered or lodged with the probate court to be valid.

Reality: A deed of variation doesn't need registration. It must be in writing, signed by relevant beneficiaries, and meet statutory requirements under Section 142 of the Inheritance Tax Act 1984. You only send a copy to HMRC if it increases tax liability. This myth exists because people confuse variations with probate grants.

Myth: I can use a deed of variation to redirect my inheritance and still qualify for means-tested benefits because technically I never received it.

Reality: This is absolutely incorrect and could constitute fraud. If you receive means-tested benefits and use a variation to redirect inheritance, the Department for Work and Pensions will treat this as deliberate deprivation of assets. You'll be deemed to still possess those assets and may have to repay benefits. Benefits rules specifically target deliberate deprivation—voluntarily giving up inheritance clearly falls within this category.

  • Beneficiary: Only beneficiaries entitled to inherit have legal standing to make a deed of variation.
  • Inheritance: Variations specifically affect inheritance received under a will or intestacy.
  • Estate Distribution: Variations modify the original distribution pattern established by the will or intestacy rules.
  • Probate: A variation can be made before or after probate grant, within the two-year deadline.
  • Inheritance Tax Planning: Most variations are made for tax planning, using the reading back provision to reduce liability.
  • Can a Will Be Changed After Death?: Complete guide covering legal requirements, tax benefits, and step-by-step process.
  • Using a Deed of Variation to Change a Will: Strategic guidance on tax planning opportunities and decision-making factors.

Need Help with Your Will?

While deeds of variation provide flexibility after death, proper will planning helps avoid complications. Create your will with WUHLD for just £99.99. Preview your will free before paying—no credit card required.

Legal Disclaimer: This glossary entry provides general information about UK legal terminology and does not constitute legal advice. For advice specific to your situation, consult a qualified solicitor. Deeds of variation involve complex tax law and strict legal requirements—seek professional advice from a solicitor specializing in wills and probate.