Most people believe that once a person dies and their will is executed, nothing can be changed. Yet under UK law, beneficiaries can legally alter the distribution of an estate after someone’s death using a Deed of Variation — and in many cases, this single document has saved families tens of thousands in Inheritance Tax (IHT).
This article explores how a Deed of Variation works, how it saved £68,000 in IHT in one real-life scenario, who qualifies, the time limits, HMRC’s stance, and the legal steps involved in using it correctly.
1. What Is a Deed of Variation?
A Deed of Variation is a legal document that allows beneficiaries of a deceased person’s estate to change how assets are distributed — even after the person has died. It is also known as:
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Deed of Family Arrangement
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Instrument of Variation
If completed within two years of the date of death, HMRC treats the amended distribution as if it was made by the deceased themselves. This means any gifts, transfers, or alterations made through a Deed of Variation are considered part of the original will for tax purposes.
2. Why Would Anyone Change a Will?
Families typically use a Deed of Variation for reasons such as:
✅ To Reduce Inheritance Tax
Redirecting assets to a spouse, charity, or into a trust can legally reduce or eliminate inheritance tax.
✅ To Provide for Family Members Not Included in the Will
For example, grandchildren, stepchildren, or dependent relatives.
✅ To Avoid Double Taxation
Passing assets directly to the next generation rather than to parents who will themselves die and pay IHT on the same assets.
3. Real Example: How £68,000 Was Saved
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A father passed away leaving an estate to his adult son.
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The estate exceeded the £325,000 Nil Rate Band, resulting in a £68,000 IHT liability.
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Instead of accepting the entire inheritance, the son signed a Deed of Variation, redirecting £200,000 to the deceased’s spouse (the son’s mother).
Because gifts to spouses are exempt from IHT, the tax bill was reduced by £68,000. HMRC accepted the Deed because:
✔ It was completed within two years of death
✔ The son voluntarily gave up part of his inheritance
✔ HMRC form IHT409 was submitted correctly
4. Key Rules for Deeds of Variation
| Rule | Requirement |
|---|---|
| Time limit | Must be completed within 2 years of death |
| Who can apply? | Any beneficiary aged 18 or over who is receiving part of the estate |
| Consent needed? | Only from beneficiaries whose inheritance is being reduced |
| HMRC notification | Required if it alters inheritance tax liability |
| Cannot | Be used to avoid debts, child maintenance, or care home fees |
| Tax treatment | Deemed as if the deceased made the gift |
5. When Is It Most Beneficial?
A Deed of Variation is most effective when:
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An estate exceeds the IHT threshold and could benefit from spousal exemption or charitable exemption
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The will leaves everything to children rather than the surviving spouse
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A beneficiary does not need the inheritance and wants it to pass to children or grandchildren
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A family wishes to create a trust to protect vulnerable beneficiaries or reduce future IHT
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A previous spouse’s Residence Nil Rate Band was not used and can be transferred
6. Tax Benefits in Detail
✔ Inheritance Tax Reduction
Redirecting assets to exempt recipients like spouses or charities reduces IHT.
✔ Residence Nil Rate Band (RNRB) Optimisation
Redirecting a property (or share of it) to direct descendants can unlock the extra £175,000 RNRB allowance.
✔ Avoiding Double Taxation
Assets left to elderly parents may be taxed twice — once on the first death and again when parents pass away. Using a Deed to pass directly to grandchildren avoids this.
7. What Must the Deed Contain?
A valid Deed of Variation must include:
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Full name of the deceased
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Date of death
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Details of original inheritance
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Description of the change being made
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Statement requesting HMRC to treat it per section 142 of the Inheritance Tax Act 1984
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Signature of all affected beneficiaries
8. Is HMRC Against This?
No. HMRC recognises Deeds of Variation as legal, provided:
✔ All conditions are met
✔ It is not used for deliberate tax evasion
✔ It is not made for financial compensation between beneficiaries
HMRC only becomes concerned if:
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Payments are made in exchange for signing
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It is backdated beyond two years
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It is used to avoid income tax or capital gains tax unfairly
9. What Happens If There’s No Deed of Variation?
Without a Deed of Variation:
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The original will stands exactly as written
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IHT is calculated immediately on the estate as is
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Passing assets to children may trigger unnecessary IHT, instead of using spousal exemption
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Families may face complications when trying to rearrange finances later
10. Step-by-Step: How to Execute a Deed of Variation
Step 1: Review the Will and IHT Position
Assess whether changing the distribution reduces IHT or benefits family members more fairly.
Step 2: Consult a Professional
Legal and tax advisers — such as My Tax Accountant — can ensure compliance, draft documents, and communicate with HMRC.
Step 3: Draft the Deed
Include all required legal statements and signatures.
Step 4: Submit to HMRC (If Needed)
For cases affecting IHT, forms such as IHT400 or IHT409 must be sent.
Step 5: Keep Records Safe
HMRC can request the deed during audits, even years later.
11. Can Beneficiaries Be Forced to Agree?
No. A Deed of Variation must be voluntary. Each adult beneficiary affected must agree and sign freely.
12. Risks and Limitations
| Risk | Detail |
|---|---|
| Time constraint | Must be completed within two years; no extensions allowed |
| Beneficiary disputes | All affected beneficiaries must agree |
| Cannot avoid debts | Deed is invalid if used to avoid paying creditors |
| Not suitable for minors | Court approval is needed if a beneficiary is under 18 |
13. Key Takeaways
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A Deed of Variation can legally rewrite a will after death
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Must be signed within two years of death
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Can redirect assets to spouses, children, grandchildren, or charities
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In the example discussed, it saved £68,000 in Inheritance Tax
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HMRC treats it as though the deceased made the new gift themselves
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Professional guidance is strongly recommended to avoid legal errors