Glossary · UK
What is Deed of Variation?
A legal document that lets beneficiaries redirect part or all of an inheritance to others, with the change treated as if made by the deceased for tax purposes.
Full Definition
A Deed of Variation (sometimes called a deed of family arrangement) allows the beneficiaries of an estate to alter how that estate is distributed after someone has died. It can redirect a gift to a different person, a trust, or charity. To be effective for Inheritance Tax and Capital Gains Tax, the deed must be made in writing within two years of the death, contain a statement that the relevant tax provisions are to apply, and be signed by all beneficiaries who give up an entitlement. When valid, the variation is read back as if the deceased had made the gift, which can reduce IHT, for example by leaving more to a spouse (exempt) or to charity, potentially qualifying the estate for the reduced 36% IHT rate where at least 10% of the net estate passes to charity. It can also be used to skip a generation or to make better use of the 325,000 nil-rate band and 175,000 residence nil-rate band. A deed of variation cannot be used to obtain extra benefit for someone who provides consideration, and it does not override the will for non-tax purposes unless all affected parties agree.