If you’ve come across phrases like “Deed of Variation,” “IPDI,” or “GAAR/DOTAS,” you’re not alone—these are common topics for anyone dealing with a loved one’s estate, but they’re rarely explained in plain English.

What is a Deed of Variation (DOV)?

A Deed of Variation allows beneficiaries of a will or intestacy to change how the estate is distributed, even after someone has died. This can be useful if the original will doesn’t reflect the family’s wishes, or if you want to redirect assets for tax planning reasons. For example, a child might give up their inheritance so it passes to a surviving parent, making better use of inheritance tax allowances.

Immediate Post-Death Interest (IPDI): What Does It Mean?

An IPDI is a type of trust interest created by a will or variation, where a beneficiary has an immediate right to income or enjoyment of assets after someone’s death. This is important for tax purposes, as IPDIs are treated differently from other trusts and can affect how inheritance tax is calculated.

GAAR and DOTAS: The Taxman’s Anti-Avoidance Rules

GAAR (General Anti-Abuse Rule) and DOTAS (Disclosure of Tax Avoidance Schemes) are HMRC’s tools for stopping aggressive tax planning. If you’re considering a variation or trust arrangement, it’s important to avoid anything that could be seen as a scheme to dodge tax. Most family arrangements are fine, but if you’re paying someone to disclaim an interest or making complex arrangements, you could fall foul of these rules.

Common Questions and Issues

• Can I pay someone to give up their inheritance?
  No. If any consideration (payment or benefit) is given for a disclaimer or variation, it can ruin the tax benefits and may not be valid for inheritance tax purposes.

  
  

• Is there a time limit for making a Deed of Variation?
  Yes. For inheritance tax and capital gains tax purposes, the variation must be made within two years of the death.

  
  

• What if the estate includes foreign property or excluded property?
  The rules can be different, and sometimes foreign law applies. If you’re dealing with assets outside the UK, take extra care.

  
  

• Can I use a Deed of Variation to benefit someone not named in the will?
  Yes, but only if all affected beneficiaries agree and sign the deed.

  
  

• Will HMRC challenge my arrangement?
  Most straightforward family variations are accepted, but anything involving payment, complex trusts, or attempts to exploit loopholes could be challenged under anti-avoidance rules.

Top Tips for Families

• Always make sure any variation is genuinely voluntary—no payments or side deals.

• Get everyone’s agreement in writing, and keep clear records.

• If you’re unsure, check HMRC’s guidance or ask the probate registry for clarification.

• Don’t rush—take time to understand the implications before signing anything.

Common Mistakes to Avoid

• Paying someone to disclaim or vary their interest.

• Missing the two-year deadline for variations.

• Assuming all trusts are treated the same for tax—IPDIs have special rules.

• Overcomplicating things with unnecessary schemes or arrangements.

Conclusion

Deeds of Variation and IPDIs can be powerful tools for families managing inheritance, but they come with strict rules and potential pitfalls. By keeping things simple, avoiding payments for disclaimers, and staying within the time limits, you can make the most of the options available without risking trouble with HMRC.

Disclaimer: This article is for general information only and does not constitute legal, financial, or tax advice. You should consider your own circumstances and seek professional support if you need specific guidance. While every effort has been made to ensure the information is up to date, requirements and procedures may change.