A deed of family arrangement lets the beneficiaries of a UK estate collectively redirect inherited assets — to each other, to charity, or to a trust — without a court order, provided everyone who loses out agrees in writing and the deed is executed within two years of the deceased's death. The tax treatment falls under section 142 of the Inheritance Tax Act 1984 and section 62(6) of the Taxation of Chargeable Gains Act 1992, which together treat the redirection as if it had been made by the deceased on the date of death.
inheritance agreement deed of variation uk — free, fillable template; download as PDF or Word.
What a deed of family arrangement actually does
When a person dies, their estate passes either under the will or (if there is no will) under the intestacy rules in the Administration of Estates Act 1925. A deed of family arrangement does not change those rules retrospectively. Instead, it records an agreement between the beneficiaries to hold their entitlements differently. Because the tax statutes then deem the variation to have been made by the deceased, the estate is taxed as if the original distribution had never happened — no second charge to inheritance tax arises on the redirected assets.
The deed can redirect any interest arising under the will or intestacy: a specific legacy, a residuary share, or an interest in a trust that formed part of the estate. Interests passing outside the estate — jointly owned property passing by survivorship, or a pension lump sum paid at the trustees' discretion — sit outside section 142 and cannot be varied this way.
The two-year window under IHTA 1984 s.142
Section 142(1) IHTA 1984 sets a hard deadline: the variation must be made within two years of the deceased's death. There is no power to extend this period, and HMRC has no discretion to accept late deeds. The date that counts is the date the deed is signed by all required parties, not the date it is sent to HMRC or the date of any subsequent HMRC acknowledgement.
Executors frequently receive enquiries from families who have just discovered a tax planning opportunity three years after the death. The answer is always the same: section 142 relief is not available. A deed of family arrangement executed outside the two-year period is still a valid legal document and the beneficiaries can still agree to redirect assets, but the redistribution will be treated as a disposal by the redirecting beneficiary — triggering CGT at the point of transfer rather than being re-based to the date-of-death value.
Who must sign
Every person who is disadvantaged by the variation must sign. This is not optional. If a residuary beneficiary receives a smaller share so that a grandchild can receive a direct legacy, the residuary beneficiary must be a party. If multiple residuary beneficiaries are each giving up a portion, all of them must sign.
Where a beneficiary is a minor, a parent or guardian cannot sign away a child's entitlement without court approval under the Variation of Trusts Act 1958. The same applies where a beneficiary lacks mental capacity — a Court of Protection order is required before that person's share can be varied. These are the circumstances where a deed of family arrangement does necessitate court involvement, even though the mechanism itself is out-of-court in straightforward cases.
The personal representatives (executors or administrators) of the estate do not need to be parties unless the variation increases the burden on the estate — for example, by creating a liability for additional inheritance tax — or unless the deed changes the residue in a way that requires fresh conveyancing of estate assets. In practice, solicitors usually include the PRs as signatories as a matter of good administration, but it is not a legal requirement for s.142 purposes where no additional IHT falls due.
CGT re-basing: the capital gains advantage
One of the most overlooked benefits of a deed of family arrangement is the CGT re-basing effect. Under section 62(6) TCGA 1992, a beneficiary who varies their entitlement is treated as never having acquired the asset. The person who receives the asset instead is treated as if they acquired it directly from the deceased at the date of death — at the probate value, not at any later market value. If property has risen in value between the date of death and the date of the deed, that gain is effectively wiped out from a CGT perspective.
This is particularly significant where an estate contains investment portfolios or rental properties that have appreciated since death. Families sometimes use a deed of family arrangement specifically to redistribute assets into the hands of lower-rate taxpayers or into a trust, combining the IHT re-basing with a CGT-efficient structure.
Interaction with the residence nil-rate band and nil-rate band
The nil-rate band for 2026/27 remains frozen at £325,000. The residence nil-rate band (RNRB) sits at £175,000 per person, tapering above £2 million. Both bands transfer between spouses and civil partners.
A deed of family arrangement can rescue a lost RNRB. If the deceased left everything to a surviving spouse — exempt from IHT but with the RNRB unused because no residential property passed to a direct descendant — a variation executed within two years can redirect the family home from the spouse to the children. The deemed-at-death rule then allows the first spouse's RNRB to be claimed, cutting the eventual IHT charge on the survivor's estate. Any variation that redirects assets from an exempt to a non-exempt beneficiary must be modelled carefully, as it can create an IHT liability on the first estate that was not previously payable.
When HMRC notification is mandatory
Not every deed of family arrangement needs to be sent to HMRC. Section 142(2) IHTA 1984 requires the deed to contain a statement that the parties intend s.142 to apply. Under section 142(2A), where the variation results in additional tax being payable, the personal representatives must also be included as signatories to that statement in the deed itself — they cannot be excluded unless they hold insufficient assets to meet the additional liability. Any additional IHT that becomes payable must be paid in accordance with HMRC's standard IHT payment rules; practitioners should confirm the applicable deadline with HMRC at the time of execution. For the CGT re-basing under s.62(6) TCGA 1992, both the person making the variation and the person who benefits from it must sign the election — which is included in the deed itself, not on a separate form.
Where the variation creates no additional IHT and involves no chargeable gain (for instance, a redistribution of cash), there is no proactive HMRC notification obligation. The deed should nonetheless be kept, as HMRC may request it during a later compliance check or on the surviving spouse's death.
Deed of family arrangement versus deed of disclaimer
A deed of family arrangement and a deed of disclaimer are often confused but operate differently. A disclaimer is a unilateral act by a single beneficiary who simply refuses their entitlement entirely. Once disclaimed, the interest passes as if the disclaiming beneficiary had predeceased — the disclaiming person cannot direct where the disclaimed interest goes. A deed of family arrangement is a multilateral agreement that can redirect assets to any person the beneficiaries choose.
The tax treatment under s.142 applies equally to both, provided the two-year window and other conditions are met. A disclaimer is appropriate where a beneficiary wishes to take no part in the estate and is content for their share to fall into residue. A deed of family arrangement is the right tool wherever the family wants to actively steer an inheritance to a particular person, a trust, or a charity.
Charities and the reduced rate
Where a deed of family arrangement redirects at least 10% of the baseline estate to a qualifying charity, the estate may qualify for the 36% IHT rate under Schedule 1A IHTA 1984 rather than the standard 40%. Because the variation is deemed to have been made by the deceased, the charitable gift is treated as part of the original estate distribution — making this a route to honour undocumented charitable intentions while reducing the tax charge.
Practical steps
Drafting a deed of family arrangement requires identifying every party who loses an entitlement, valuing the interests being redirected, confirming that none of those parties is a minor or lacks capacity, and including the correct s.142 and s.62(6) elections. Forms-legal.com's deed of variation template for England and Wales covers the standard structure, though a solicitor should review any deed that creates additional IHT liability or involves complex trust interests. Once signed, each party's signature must be witnessed by an independent adult, and the personal representatives should update the estate accounts to reflect the varied distribution before the estate is wound up.
Common errors
Families occasionally sign a deed of family arrangement before probate has been granted. The safer practice is to wait until the grant of representation has issued, because a beneficiary cannot vary an entitlement they have not yet formally received.
A second mistake is attempting to vary an interest that has already been distributed. Once an executor has transferred an asset to a beneficiary and the beneficiary has received it, any subsequent agreement to redirect is a gift by that beneficiary — not a variation — and falls outside s.142.
The two-year clock and the requirement for unanimous consent make early advice essential. Taking legal advice within the first few months of the death, rather than month twenty-three, leaves time to model the options and draft the deed correctly.
Need the document itself? Download the free template →
This article is general information, not legal advice — see our accuracy & editorial policy. Confirm the cited law is current before relying on it.