This guide is maintained as a current resource for September 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Want to change how an estate is distributed after a death? Discover how a Deed of Variation can legally adjust inheritance, the tax implications involved, and the essential steps for beneficiaries and executors.
In some circumstances after a death, the way a deceased person's estate is distributed under a will or under the rules of intestacy may no longer suit the needs of the beneficiaries. A Deed of Variation is a legal tool that allows beneficiaries to agree to alter how inheritance is allocated. This article explains what a Deed of Variation is, why it might be used, when it must be completed, how it affects tax, the legal requirements and practical steps involved, as well as the risks to be aware of.
What Is a Deed of Variation?
A Deed of Variation (sometimes called a “deed of family arrangement” or “instrument of variation”) is a written agreement entered into by beneficiaries of an estate after death that legally changes how that estate is distributed. It enables a beneficiary who is entitled to receive assets under a will, or under intestacy, to give up some or all of that entitlement in favour of another person or persons.
The law does not actually change the original will document itself; instead, a Deed of Variation alters the effects of distribution so that, for legal and tax purposes, the estate is treated as if the variations were included in the deceased's will from the date of death.
Why Beneficiaries Might Use a Deed of Variation
Beneficiaries and executors may consider a Deed of Variation for a range of reasons, including:
1. Inheritance Tax Efficiency
A Deed of Variation can be used to reduce or mitigate inheritance tax (IHT) liability. For example, redirecting assets to a spouse or civil partner (who are IHT‑exempt) or to a charity can lower the taxable value of the estate. If at least 10% of the deceased's estate is given to charity under a variation, the IHT rate on the rest of the estate can fall from 40% to 36%.
2. Capital Gains Tax (CGT) Considerations
If inherited assets such as property are likely to be sold by the beneficiary, varying the distribution can affect the CGT basis. If executed within the required timeframe and drafted appropriately, the transfer can take effect for CGT purposes as though made at the date of death, preserving the original base cost for tax.
3. Providing for Excluded or Needy Family Members
A variation might be made to benefit someone omitted from the will or who would not inherit under intestacy rules, such as an unmarried partner, stepchild or other dependent.
4. Fairness and Changed Circumstances
Changes in family circumstances – such as the birth of grandchildren, or beneficiaries already being financially secure – might lead survivors to agree on a different distribution that better reflects current needs.
Who Can Make a Deed of Variation?
Only beneficiaries entitled under a will or under intestacy rules can enter into a Deed of Variation. Each person must be:
- Over the age of 18, and
- Of sound mind (mentally capable).
If a proposed variation would affect the entitlement of someone who is under 18 or lacks mental capacity, formal court approval is required.
Executors or administrators of the estate are often involved in the process - particularly where tax implications arise - but the variation itself is initiated by the beneficiaries.
When Must a Deed of Variation Be Completed?
To secure the important tax benefits relating to IHT and CGT, a Deed of Variation must be completed within two years of the date of the person's death. This time limit is strict; if the deed is executed after the two‑year window, it will not be treated as taking effect from the date of death for tax purposes, even if it is otherwise valid.
The deed can be executed before or after a grant of probate or letters of administration is obtained. What matters for tax treatment is the timing relative to the date of death, not the grant itself.
Legal Requirements and Content of a Deed of Variation
To be valid and effective for tax purposes, a Deed of Variation must:
- Be in writing (most commonly as a formal deed).
- Be signed by all affected beneficiaries.
- Contain a statement of intent that the variation is to take effect for inheritance tax and capital gains tax purposes.
- Not be made for consideration (i.e. it must not involve payment for the right to vary).
- Be executed within two years of the date of death.
Most practitioners also recommend that executors are informed of the deed, and that a copy is provided to HM Revenue & Customs (HMRC) if the deed changes the amount of IHT payable.
Practical Steps in Using a Deed of Variation
- Confirm Beneficiary Status – Ensure you and any other parties to the variation are legally entitled beneficiaries.
- Agree on Terms – All beneficiaries affected by the variation must agree on the revised distribution.
- Draft the Deed – A solicitor or experienced professional should prepare the deed, including a clear description of the assets being varied and the intended changes.
- Execute the Deed – All relevant beneficiaries sign the document.
- Notify HMRC if Needed – If the variation will alter the IHT payable, send HMRC a copy of the deed within six months of execution.
- Update Estate Administration – Provide a copy of the deed to the executor or administrator, who will administer the estate in line with the agreed variation.
Tax Implications
Inheritance Tax
If completed correctly and within two years, a Deed of Variation is treated for IHT purposes as though the variation was part of the deceased's original will or intestacy disposition. This means that benefits given to exempt beneficiaries (such as a spouse or charity) do not count towards the taxable estate, potentially reducing IHT payable.
Capital Gains Tax
For CGT purposes, where applicable, the variation can be “written back” to the date of death so that beneficiaries acquiring assets under the deed are treated as having received them at the date of death value. Without this, disposal by the original beneficiary before variation could trigger different tax consequences.
Limitations and Risks
A Deed of Variation cannot be used to:
- Increase a beneficiary's entitlement without the consent of others whose shares will be reduced.
- Change the legal role of executors or guardians named in a will.
- Validate a void or invalid will.
- Be applied where any affected beneficiary is under 18 or lacks capacity without court approval.
If any beneficiary refuses to sign, the deed is invalid. The variation itself is irrevocable once executed, meaning it cannot be withdrawn or changed later.
Common Scenarios
Common uses of a Deed of Variation include:
- Redirecting part of an inheritance to younger family members or grandchildren.
- Giving assets to charity to reduce IHT.
- Adjusting distributions where a will does not reflect current family circumstances.
- Equalising inheritance among beneficiaries.
Key Takeaways
A Deed of Variation is a formal legal mechanism that allows beneficiaries to alter how an estate is distributed after someone's death. It is particularly valuable for managing inheritance tax and capital gains tax liabilities and for ensuring the estate distribution reflects current family circumstances or needs. To be effective for tax purposes, the deed must be in writing, signed by all relevant beneficiaries, and executed within two years of the date of death. While it cannot change the will itself, a properly executed deed alters the distribution as though the changes had been included in the will from the outset. Understanding the role, requirements and effects of a Deed of Variation helps beneficiaries and executors make informed decisions when estate administration presents complex challenges.
