Deed of Variation Template

A deed of variation is a legal document that allows a beneficiary of a will (or someone entitled under intestacy rules) to redirect all or part of their inheritance to someone else. The new beneficiary does not need to have been named in the original will and does not need to be related to the original beneficiary.

Key Features:

• Inheritance redirection — Redirect cash, property, shares, or the entire residuary estate to chosen beneficiaries
• IHT tax election — Under IHTA 1984 s.142, the variation is treated as if the deceased had made the disposition, avoiding a potentially taxable lifetime gift
• CGT tax election — Under TCGA 1992 s.62, the new beneficiary is treated as having acquired the assets at the date of death for capital gains purposes
• Two-year deadline — Must be executed within two years of the date of death to qualify for tax elections
• Consent required — All beneficiaries whose entitlement is reduced must agree and sign
• No consideration — The original beneficiary must not receive money or other compensation for making the variation

Common Reasons for Using a Deed of Variation:

Families use deeds of variation for inheritance tax planning (passing inheritance directly to grandchildren to skip a generation), to provide for someone not included in an outdated will, to redirect inheritance to charity (potentially qualifying for the 36% reduced IHT rate), to settle potential claims against the estate, or simply to create a fairer distribution among family members.

Our deed of variation is professionally drafted following IHTA 1984 s.142 and TCGA 1992 s.62 requirements for England and Wales.

Legal and Financial Risks:

• Treated as a lifetime gift: Without a valid deed of variation, giving away your inheritance is treated as a potentially exempt transfer (PET). If you die within 7 years, it may be subject to inheritance tax.
• No IHT "reading back": Without the s.142 election, HMRC treats the redirection as coming from you, not from the deceased — losing valuable nil-rate band advantages.
• Capital gains tax exposure: Without the s.62 CGT election, the new beneficiary's base cost is the market value at the date you redirected the asset — not the date of death — potentially increasing their CGT liability on any future sale.
• Two-year deadline missed: If more than two years have passed since the death, the tax elections are no longer available. The window cannot be extended.
• Invalid execution: A deed of variation must be executed as a deed with proper witness requirements. An informal letter or verbal agreement may not qualify for tax elections.
• Missing consent: All beneficiaries whose share is reduced must sign. Missing even one signature can invalidate the entire deed.
• No HMRC notification: If the variation increases the IHT payable, a copy must be sent to HMRC within 6 months of execution along with a completed IOV2 checklist.

A £22 investment in a properly drafted deed of variation can help avoid these costly mistakes.

Comprehensive Deed Coverage:

• ✓ Full deceased details and will/intestacy identification
• ✓ Original beneficiary (variator) identification and address
• ✓ New beneficiary details — supports up to 4 beneficiaries
• ✓ Equal or specific percentage allocation options
• ✓ Detailed property description section (cash, real property, residuary estate, specific legacies, mixed)
• ✓ Approximate property value at date of death
• ✓ Inheritance Tax election clause (IHTA 1984 s.142)
• ✓ Capital Gains Tax election clause (TCGA 1992 s.62)
• ✓ No-consideration confirmation clause
• ✓ Personal representative (executor/administrator) provisions
• ✓ Governing law statement
• ✓ Third party rights exclusion (Contracts (Rights of Third Parties) Act 1999)
• ✓ Counterparts clause
• ✓ Proper deed execution with witness requirements
• ✓ New beneficiary acknowledgment sections
• ✓ Probate/Letters of Administration reference field

Professional, comprehensive, and structured following UK inheritance tax legislation.

Related documents: Families often also create a Last Will and Testament for estate planning, Codicil to amend a will while still alive, and Lasting Power of Attorney for future planning.

Don't Make These Critical Errors:

• Missing the two-year deadline: The deed must be executed within two years of the date of death. There is no extension and no exception — miss it and the tax elections are gone.
• Forgetting to include all affected beneficiaries: Every person whose inheritance share is reduced must consent and sign. Missing one signature can invalidate the entire deed.
• Omitting the tax election statements: Without the specific IHTA 1984 s.142 and TCGA 1992 s.62 election wording, HMRC will not treat the variation as made by the deceased.
• Receiving consideration: If the original beneficiary receives money or other value in exchange for making the variation, the tax elections fail. The variation must be gratuitous.
• Not executing as a proper deed: A deed of variation should be executed as a deed — signed, witnessed, and delivered. An informal letter may not provide the same legal certainty.
• Varying the same assets twice: You can only vary each disposition once. A second variation of the same assets is treated as a gift from you, not the deceased.
• Involving minor beneficiaries: If the variation affects a child's entitlement, court approval is usually required. A parent cannot sign on behalf of a minor.
• Failing to notify HMRC: If additional IHT arises, a copy of the deed and a completed IOV2 checklist must be sent to HMRC within 6 months of execution.
• Not including personal representatives: Where additional IHT arises, personal representatives must join in the deed under s.142(2A). It is best practice to include them regardless.

Our template helps avoid these mistakes with proper structure, tax election clauses, and clear guidance notes.