Deeds of variation: changing who inherits after a death

What a deed of variation does

A deed of variation is a document signed by somebody who inherits from an estate, redirecting all or part of that inheritance to another person. It works whether the estate passed under a will or under the intestacy rules.

The reason it matters is the tax treatment. Ordinarily, if a beneficiary receives £100,000 and hands it to a child, that is a lifetime gift by the beneficiary and carries their own seven-year exposure to inheritance tax. Where a variation meets the statutory conditions, section 142 of the Inheritance Tax Act 1984 treats the redirection as having been made by the deceased, so the inheritance tax position is worked out as though the will had said so from the start.

Despite the name, no deed is strictly required and the document does not have to be called a variation. What matters is that it is in writing, signed by the right people, and contains the right statements.

Why families use one

Several situations come up repeatedly.

Putting an intestacy right. Where somebody died without a will, the statutory rules may leave out an unmarried partner or a stepchild entirely. The people who do inherit can redirect part of the estate to them.

Skipping a generation. An adult child who does not need the money can redirect it to their own children, keeping it out of their estate without starting a seven-year clock of their own.

Using the charity rate. Leaving 10% or more of the net estate to charity reduces the inheritance tax rate on the rest of the estate from 40% to 36%. Where an estate falls just short, a variation adding to a charitable gift can leave the family better off in cash terms as well as the charity.

Correcting a will that no longer fits. A will drafted before a divorce, a birth or a change in the law may produce a result nobody wanted. Where the beneficiaries agree, a variation fixes it.

Equalising between siblings where lifetime gifts, or a property already transferred, have left the will producing an uneven outcome.

The conditions that have to be met

Section 142 sets out what is required, and each element is a hard condition.

The variation must be in writing. It must be made within two years of the date of death, and that deadline cannot be extended. It must be made by the person who would otherwise benefit, so the executors cannot do it on a beneficiary's behalf. It must contain an express statement by the people making it that section 142 is to apply. And no consideration in money or money's worth may pass, other than the making of another variation of the same estate.

The consideration point is the one that most often destroys the intended treatment. A beneficiary who redirects an inheritance in exchange for a payment from outside the estate, or in exchange for some other benefit, takes the arrangement outside section 142 entirely. Reciprocal variations within the same estate are permitted, and anything wider needs advice before it is signed.

Where the variation increases the inheritance tax due on the estate, the personal representatives also have to join in, and they can decline where the estate does not hold enough to pay the extra tax.

What reading back actually means

Reading back is a tax fiction, and it is limited to tax. For inheritance tax the property is treated as having passed under the deceased's will or intestacy directly to the new beneficiary, so the original beneficiary never made a gift and no seven-year period starts for them.

It does not rewrite the will for other purposes. The estate is still administered under the original document, and anybody reading the will later will see the original provisions. It also does not undo what has already happened: income arising on the asset before the variation belongs to the original beneficiary and is taxed on them.

Two further points catch people out. Reading back applies for inheritance tax and, on a separate election, capital gains tax, and it does not extend to income tax, so a variation creating a trust for the original beneficiary's own minor children can still see the income taxed as theirs. And the variation cannot be used to reduce a charge that has already crystallised on a lifetime transfer.

Capital gains tax and the separate election

A parallel provision in section 62(6) of the Taxation of Chargeable Gains Act 1992 allows the same reading back for capital gains tax, and it requires its own statement in the document.

The two statements are independent. A variation can elect for inheritance tax treatment, capital gains treatment, both or neither, and there are cases where electing for one and not the other produces the better result. Assets that have risen in value since the death are where this matters most, because without the capital gains election the redirection is a disposal by the original beneficiary at market value.

Where either election is made and it increases the tax due, the document has to be sent to HMRC within six months of being signed.

Where it does not work

A variation only reaches property that formed part of the estate. It cannot touch assets that passed outside it, and the two big categories are property held as joint tenants, which passed automatically by survivorship, and death benefits paid at the discretion of pension trustees.

There is a narrow exception for joint property: section 142 can apply to an interest that passed by survivorship, and it has to be dealt with expressly. Pension death benefits paid at trustee discretion have never formed part of the estate and cannot be varied, although the inheritance tax treatment of unused pension funds changes for deaths on or after 6 April 2027.

A variation also cannot be used where the two-year window has closed, and it cannot bind a beneficiary who refuses to sign. Every adult whose entitlement is reduced has to agree, and one refusal ends it.

Minors, unborn beneficiaries and the court

A beneficiary under 18 cannot give a valid consent, and neither can a beneficiary who is not yet born. Where a variation would reduce what they receive, an application to the court under the Variation of Trusts Act 1958 is required, and the court will only approve it where the arrangement is for that beneficiary's benefit.

That takes months and costs money, so where children are involved the sensible order is to take advice on whether the variation can be structured to leave their entitlement untouched.

The same problem arises where a beneficiary lacks mental capacity, and an application to the Court of Protection may be needed instead.

A worked example

A widow dies leaving a net estate of £900,000. Her husband died some years earlier leaving everything to her, so his nil rate band was unused and transfers across, giving her estate £650,000 of nil rate band. She did not own a home at her death, so no residence nil rate band is available. Her will leaves £20,000 to a cancer charity and the rest equally between two adult children.

The chargeable estate is £900,000 less the £20,000 charitable gift, which is £880,000. Against that sits £650,000 of nil rate band, leaving £230,000 taxable at 40%, so £92,000 of inheritance tax. The children receive £788,000 between them.

Now test the charity rate. The baseline for the 10% test is the chargeable estate before the charitable gift, less the available nil rate band: £880,000 plus the £20,000 gift is £900,000, less £650,000, giving a baseline of £250,000. Ten per cent of that is £25,000, so the £20,000 gift falls £5,000 short and the estate pays at 40%.

The children sign a variation increasing the charitable gift to £25,000. The chargeable estate becomes £875,000, the taxable slice £225,000, and the rate drops to 36%, so the tax is £81,000. The children now receive £794,000 between them. They have given away £5,000 more and finished £6,000 better off, and the charity has £5,000 more.

The arithmetic does not always land that way. Where a gift is already well short of the threshold, increasing it to reach 10% costs the family money, so the calculation has to be run on the actual figures before anybody signs.

Doing it properly

Three things tend to go wrong. The statements are omitted or worded loosely, so the variation is effective between the parties but achieves nothing for tax. Something is given in return, taking it outside section 142. Or the two-year deadline passes while the family is still deciding.

The practical sequence is to establish what actually formed part of the estate, confirm who has to sign, agree what the redirection is meant to achieve for each person affected, and then draft the statements to match. Where the variation increases the tax, check that the estate can fund it before anybody signs.

Frequently asked questions

How long do I have to make a deed of variation?

Two years from the date of death, and the deadline is absolute. The document has to be in writing, signed within that period by the beneficiary giving up the entitlement, and it has to contain an express statement that section 142 of the Inheritance Tax Act 1984 applies if you want the inheritance tax reading back. If either election increases the tax due on the estate, the document must reach HMRC within six months of signing.

Can a deed of variation redirect a pension?

Generally no. Death benefits paid at the discretion of pension scheme trustees never formed part of the estate, so there is nothing for a variation to reach. Property held as joint tenants passed by survivorship and never came through the estate, although section 142 can apply to a survivorship interest if the document deals with it expressly. From 6 April 2027 unused pension funds count towards the estate for inheritance tax, which changes the calculation without making the benefits variable.

Does everybody have to agree to a variation?

Every adult beneficiary whose entitlement is being reduced has to sign, and a single refusal ends it. Where a beneficiary is under 18, unborn, or lacks mental capacity, they cannot consent, and an application to the court is needed before their entitlement can be varied. The personal representatives also have to join in where the variation increases the inheritance tax payable, and they can decline if the estate cannot fund it.

Can I vary a will to give money to charity and save tax?

Yes, and it is one of the more common uses. Where 10% or more of the net estate passes to charity, the inheritance tax rate on the rest of the estate falls from 40% to 36%. On an estate that falls just short of the 10% figure, adding to the charitable gift by variation can leave the family with more in cash terms as well as increasing what the charity receives. The arithmetic needs checking on the actual figures first.

Does a deed of variation change the will itself?

No. Reading back is a tax fiction and the estate is still administered under the original will or the intestacy rules. Anybody looking at the will afterwards sees the original provisions. It also does not carry across to income tax, so income that arose before the variation belongs to the original beneficiary, and a variation creating a trust for that beneficiary's own minor children can still see the income taxed as the beneficiary's.

What happens if we get the wording wrong?

The redirection still works between the people involved, because the beneficiary has genuinely given away their entitlement. What fails is the tax treatment: without the statutory statements it is a lifetime gift by the beneficiary, carrying their own seven-year exposure to inheritance tax and a potential capital gains disposal at market value. That is why the statements are checked before anybody signs.

Sources & further reading

• Inheritance Tax Act 1984, section 142
• Taxation of Chargeable Gains Act 1992, section 62
• GOV.UK: inheritance tax
• Variation of Trusts Act 1958

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 21 September 2026. AD Solicitors Limited is a recognised body regulated by the SRA (no. 8011228).