Glossary · UK

What is Instrument of Variation?

A legal document letting beneficiaries redirect part of an inheritance within two years of death, often for tax planning.

Full Definition

An instrument of variation, also called a deed of variation, lets the beneficiaries of an estate change who inherits what after someone has died. It must be made in writing within two years of the death and signed by everyone giving up a benefit. Where it contains the required statements, it can be read back for inheritance tax and capital gains tax as if the deceased had made the gift, rather than treating the original beneficiary as making a fresh gift. This is useful for skipping a generation, equalising shares, redirecting assets to a charity (potentially reducing the 40% IHT rate to 36% where at least 10% of the net estate goes to charity), or using the nil-rate band of GBP 325,000 more efficiently. It cannot increase the total estate's value and needs all affected beneficiaries to agree. It matters because it offers post-death flexibility to improve tax outcomes and fairness.