Deed of variation: changing who inherits after a death

What is a deed of variation?

It is a written document in which a beneficiary gives up some or all of an inheritance so that it passes to someone else. HMRC’s checklist, form IOV2, gives examples of why families do this: to reflect differences in the beneficiaries’ finances, or to pass an inheritance on to the next generation. It can change what passes under a will, under the intestacy rules, or the deceased’s share of jointly owned assets.

In general law, a variation is simply a gift by the beneficiary, taking effect when it is signed. The tax rules are what make it useful. If the conditions in section 142 of the Inheritance Tax Act 1984 and section 62(6) of the Taxation of Chargeable Gains Act 1992 are met, the change is “read back” and treated as if the person who died had made it in their will. It does not have to be a formal deed: HMRC accepts a letter or other document that meets the conditions.

Who needs to sign a deed of variation?

• Every beneficiary who loses out. IOV2 says the variation must be signed by all the people who would lose out because of it.
• The executors or administrators, if more inheritance tax becomes payable. They may refuse only if they do not hold enough of the estate to pay the extra tax (section 142(2A)).
• Nobody on behalf of a child. A parent’s signature for a child under 18 is not enough. A variation that reduces the interest of a child or unborn beneficiary needs the court’s approval to be fully effective (HMRC IHTM35045).
• Not a charity that benefits. A charity does not have to sign, but it must be told about the gift, and evidence of that must be given to HMRC. If it is not told, the gift cannot be read back for tax (IOV2 note 8; section 142(3A)).

What is the time limit for a deed of variation?

Two years from the date of death. HMRC’s manual says the two years include the anniversary of the death, that everyone must have signed within that period, and that there is no discretion to extend it. A grant of probate does not have to exist first. If the variation means more inheritance tax is payable, it must be sent to HMRC within six months of being made, with the calculation of the extra tax (HMRC IHTM35029). A variation made after two years can still pass property on, but it is then a gift by the beneficiary for tax purposes.

What do the inheritance tax and capital gains tax statements do?

They switch the read-back on. Since 1 August 2002, the document itself must contain a statement that the people making it intend the relevant section to apply. IOV2 gives an example of a statement that the parties intend section 142(1) of the Inheritance Tax Act 1984 and section 62(6) of the Taxation of Chargeable Gains Act 1992 to apply. You can include either statement, or both.

If a variation does not meet the conditions, it is treated as the beneficiary’s own gift. For inheritance tax it may be a potentially exempt transfer, which can become taxable if the beneficiary dies within seven years, or in some cases a transfer that is chargeable straight away (HMRC IHTM35154). To estimate the tax on the estate itself, use the inheritance tax calculator.

What are the limits on a deed of variation?

• Once only for the same asset. The same gift cannot be varied twice and still be read back, although different parts of an inheritance can be varied separately (IOV2 note 7).
• No compensation from outside the estate. If the new beneficiary pays the original one for giving up the gift, the variation is ignored for tax (IOV2 note 9).
• Some assets cannot be varied for tax. These include trust assets the deceased had a right to benefit from and gifts they made but kept a benefit in (IOV2 note 6).
• It is voluntary. Only the people who would benefit can make it, and nobody can be made to sign.

Disclaimers. A beneficiary can instead refuse a gift outright. HMRC’s manual says a disclaimer must cover the whole of the gift, cannot follow receiving any benefit from it, and cannot redirect it: the gift falls back into the residue and passes under the rest of the will or the intestacy rules. A written disclaimer made within two years is also read back for inheritance tax, without needing a statement (HMRC IHTM35162).

Following a letter of wishes. If a will leaves property to someone and the testator asked them to pass it on, a transfer that follows the request within two years is treated for inheritance tax as made by the will (HMRC IHTM35171, section 143 of the 1984 Act). See what is a letter of wishes?

Can a deed of variation affect benefits or care costs?

Yes, so check this before anyone signs. The DWP’s Advice for Decision Making, chapter H1 (paragraph H1175) says that if a residuary beneficiary gives away their interest by deed of variation before the estate is fully administered, this may amount to deprivation of capital. Someone who deprives themselves of capital to get Universal Credit, or more of it, is treated as still having it (paragraph H1795).

Councils in England assessing care and support charges follow similar principles. The Care and support statutory guidance (paragraph 8.28) says that where a person has deliberately deprived themselves of assets to avoid care costs, the council may charge them as if they still had the asset. If a beneficiary receives means-tested benefits or care support, get advice from a benefits adviser or solicitor before anyone signs.

How do you make a deed of variation?

1. Work out what each beneficiary is entitled to under the will or intestacy, and the tax position, before agreeing any change.
2. Agree the change with every beneficiary who will give something up. If a child or unborn beneficiary would lose out, take advice about court approval.
3. Put it in writing: identify the deceased and the gift being varied, say who receives it instead, add the inheritance tax and capital gains tax statements if you want them, and add a stamp duty certificate if shares are redirected.
4. Go through HMRC’s IOV2 checklist before anyone signs.
5. Have everyone sign within two years of the death, including the executors if more tax is payable.
6. If more inheritance tax is payable, send the variation and the tax calculation to HMRC within six months. Otherwise keep a copy with the completed IOV2.
7. The executors then distribute in line with the variation. If it creates a trust, HMRC’s manual says the trustees must register it with the Trust Registration Service.

When do you need legal advice?

A simple redirection between adults, with no tax payable and no benefits involved, can be straightforward. Take advice if the variation creates a trust, affects a child, involves a house, shares or a business, changes the tax bill, or involves someone on means-tested benefits or in care. SwiftWill prepares wills, not deeds of variation. A variation can also record the settlement of a dispute; see contesting a will and Inheritance Act claims. If you are an executor, the executor checklist covers the rest of the administration, and our probate guide covers the grant.

Sources

• Inheritance Tax Act 1984, section 142
• Taxation of Chargeable Gains Act 1992, section 62
• HMRC: Instrument of variation checklist (IOV2)
• HMRC Inheritance Tax Manual: IHTM35022, IHTM35024, IHTM35029, IHTM35045, IHTM35154, IHTM35161, IHTM35162 and IHTM35171
• HMRC Capital Gains Manual CG31650
• HMRC Trusts, Settlements and Estates Manual TSEM1815
• DWP: Advice for Decision Making, chapter H1 (capital)
• DHSC: Care and support statutory guidance, paragraph 8.28

Sources checked 24 September 2026.