Deeds of variation

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

This guidance note explains what a deed of variation is and how to make this effective for inheritance tax (IHT) and capital gains tax (CGT) purposes. It considers the conditions in detail and in particular the impact of the provision of consideration. It also considers the interaction with trusts and with income tax.

What is a deed of variation?

Beneficiaries of a deceased estate may vary the distribution of the assets in the estate by agreement. All of the beneficiaries negatively affected by the changes must be aged 18 or more and have capacity. If the proposals would affect minor or unborn children or those otherwise without the capacity to consent then a court order approving the changes is required.

Without special provisions, a post-death re-arrangement of this sort would be a lifetime gift by the beneficiary who is surrendering their entitlement. However, there are provisions for both inheritance tax and capital gains tax (CGT) which allow the beneficiary’s gift to be taxed as though it had been made by the deceased.

Such

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