MoneyWeek recently spotlighted both the forthcoming Budget and the renewed interest
in Deeds of Variation (DoVs). With speculation circling around possible inheritance-tax
tweaks (particularly lifetime-gifting rules) families are understandably asking how best
to future-proof estates. DoVs are part of that toolkit, but they’re precision instruments,
not blunt tools.

What a DoV can do (when done properly)

A DoV lets a beneficiary redirect all or part of an inheritance within two years of death –
say, to adult children or into a trust – so that, for Inheritance Tax (IHT) and certain Capital
Gains Tax (CGT) purposes, HMRC treats the gift as if it had been made by the deceased.
That “look-through” effect is powerful for generational planning and can be used
alongside charitable giving to secure the 36% IHT rate where at least 10% of the estate
passes to charity. But key conditions apply: it must be completed within two years,
include the statutory tax statements, and be signed by everyone whose entitlement is
affected (and by the personal representatives if more IHT becomes payable).

Where people come unstuck

Two common pitfalls: form and consent. First, the wording must do exactly what the
legislation requires: vague letters or informal “family agreements” often fail, risking the
loss of the intended tax treatment. Second, a DoV relies on the informed agreement of
all affected beneficiaries. If the inheritance of a minor or unborn child is being
affected the consent of the Court is required . Similarly, if a person has lost mental
capacity they cannot consent .

Why professional advice matters now

The upcoming Budget can tempt hurried action. But the right solution depends on your
family’s circumstances, including the Will itself, any trusts, age of the beneficiaries,
charitable aims and so on. A well-constructed DoV, drafted with the correct tax
elections and trustee/executor alignment, can be immensely effective. A poorly drafted
one can be ineffective or worse, create tax or fiduciary headaches that are expensive to
unwind.

Bottom line

It’s great to see mainstream coverage raising awareness of DoVs ahead of the Budget.
But these are not DIY documents. If you’re considering a redirection, or you have minors
or a will trust in the mix, seek advice from an experienced Estate & Trust professional.
That way, you’ll preserve eligibility for the retrospective tax treatment and, where
necessary, obtain court approval to protect vulnerable beneficiaries and the integrity of
the estate plan.