Believe it or not, people don’t always want to receive an inheritance and under UK law, you don't have to.
Whether you're worried about pushing your own estate into Inheritance Tax, you'd rather the gift went straight to your children or you simply don't want assets from a particular relative, you have three clear options: accept the inheritance and gift it on, formally disclaim it or redirect it using a Deed of Variation.
Each route carries very different tax consequences, time limits, and risks and the wrong choice can be expensive to undo.
Can you actually refuse an inheritance in the UK?
Yes, you can disclaim your inheritance but you must make sure that you do so before you receive any benefit from it. If you disclaim the gift, then you will have no say over where the money goes as it will fall back into the deceased’s estate to be distributed as per the terms of the Will or the Intestacy Rules.
Therefore, you might want to think about accepting the inheritance and gifting it on yourself or preparing a Deed of Variation.
If you inherit the money and then gift it on you will need to survive 7 years from the date of the gift for it to fall away from your estate for inheritance tax purposes. If you don’t survive the 7 years and the gift isn’t covered by enough exemptions or allowances then the recipient might need to pay some tax on the money they received. There is a sliding scale as to the rate of tax payable depending on when in those 7 years you died.
If you are concerned about this, then you could consider a Deed of Variation. This is a legal document which can be used to redirect an inheritance as though the person who died had made the gift to that new recipient in the first place. If made within two years of the deceased’s death, then these Deeds of Variation can be effective for inheritance tax purposes meaning that you don’t then need to worry about surviving the next 7 years.
Why people choose not to accept an inheritance
People choose to refuse their inheritance for a number of reasons including:
• Reducing their own future Inheritance Tax bill
• Passing the gift directly to children or grandchildren
• Restoring fairness between family members
• Estrangement, ethical objections, or unwanted assets
• Preserving Business Property Relief and Agricultural Relief
Option 1 — Accept the inheritance and gift it on
Every individual in the UK has an Annual Allowance of £3,000 each tax year.
This means that you can give away up to £3,000 every tax year and not worry about having to survive the next 7 years in order for the gifts not to impact your estate for inheritance tax purposes. If you didn’t use the full £3,000 in the last tax year, then you can pull forward that unused allowance.
There are also other allowances and exemptions that can be claimed such as the £250 small gifts, gifts out of income, gifts in consideration of marriage and gifts to charity.
If you gift over and above any of the allowances, then you will need to survive the 7 years from the date of the gift for it not to impact your estate for inheritance tax purposes.
Using the allowances and charity exemptions can be a useful option for those looking to make fairly small gifts or gifts to charities.
Those looking to make larger gifts and are worried about the impact that these gifts might have for inheritance tax purposes may wish to consider a Deed of Variation.
Option 2 — Disclaiming an inheritance
If you wish to disclaim your inheritance, then you must do so before you receive it or any benefit from it. You are effectively saying that you don’t want the money at all and it will fall back into the deceased person’s estate for distribution. It is important to note that you will have no say over where your disclaimed inheritance will pass next as this is down to the terms of the Will or the Intestacy Rules. It is possible to disclaim an inheritance under both a Will and the Intestacy Rules.
When disclaiming an inheritance, it is important that you do so with the intention to disclaim it. You will need to disclaim the full gift as you can’t disclaim just part of an inheritance.
You can disclaim a gift orally, in writing or by conduct, but it is usually better to do so in writing to ensure that the disclaimer is expressly recorded and unambiguous.
A common pitfall is to attempt to disclaim a gift after it has been accepted. At this point, it is too late to disclaim as you have already accepted it and received the benefit of it.
Option 3 — Using a Deed of Variation (post-death variation)
What is a Deed of Variation?
A Deed of Variation can be used to redirect an inheritance you are due under the terms of a Will or the Intestacy Rules. The benefits of a Deed of Variation are that you can decide where the inheritance should be redirected to, you can vary part or all of a gift and you can have already received the gift before entering into the Deed of Variation.
Deeds of Variation can also be used for tax planning purposes as they can be effective for capital gains tax and inheritance tax purposes if made within two years of the deceased’s death and include the appropriate statements about this.
Deeds of Variation can be tricky to prepare and have a variety of tax consequences, so it is always best to seek legal and tax advice before doing so.
Deeds of Variation cannot be used to vary the interests of a minor (someone aged under 18) or someone who lacks mental capacity without Court approval.
The Deed of Variation itself is a formal document which must be signed as a Deed in the presence of an independent witness. You don’t necessarily need all the beneficiaries to agree to the variation as only those affected by the variation need to sign it, and it must be for nil consideration.
You will need the Executors to agree and sign it though if the estate’s tax position is affected, and copy may need to be filed with HMRC.
Tax implications of refusing or redirecting an inheritance
Deeds of Variation can be effective for both inheritance tax and capital gains tax purposes if made within two years of the deceased’s death and include the appropriate ‘reading back’ statements.
For inheritance tax purposes, Deeds of Variation can be an effective tax planning tool to redirect inheritance and not have to worry about the 7 year rule i.e. the gift will be deemed to have been made by the deceased, so the original beneficiary can pass the money on without affecting their own tax position.
Deeds of Variation can also be used to change how much of a deceased’s estate is passing to charity to take advantage of the charity exemption or the reduced rate of inheritance tax at 36% where the appropriate % value of an estate is passing to charity.
For capital gains tax purposes, a Deed of Variation can be a useful way to ensure that the original beneficiary doesn’t have to pay any tax on an asset that has increased in value since they acquired it as the new beneficiary is treated as having acquired the asset as at the deceased’s date of death.
Deeds of Variation can also have advantages for Stamp Duty Land Tax where variations involving property are involved.
As mentioned, it is important to ensure that tax advice has been taken in relation to the impact of a Deed of Variation to ensure that all the tax consequences have been properly considered.
Once a Deed of Variation has been signed, it cannot then be redone/resigned once it is discovered that there was a mistake or an unintended tax consequence. In these situations, applications will need to be made to the Court.
When refusing an inheritance is a bad idea
There are certain situations when it may not be a good idea to disclaim or vary an inheritance. For example, a beneficiary should carefully consider whether it is appropriate to disclaim an inheritance if they are:
• Going through a divorce or other dispute
• Bankrupt or subject to an IVA
• In receipt of means tested benefits or the local authority is paying for their care
Deeds of Variation also need to be made for nil consideration so there should not be any ‘side deals’ or other benefits in exchange for the Deed of Variation.
Of course, Deeds of Variation have the potential to affect someone’s tax position, and it may not be advantageous to them to enter into one.
Special situations to be aware of
There are certain special situations where particular care and further advice ought to be taken, for example when variations involve:
• a gift to/from a minor child. Court approval might be needed here
• redirecting a foreign inheritance or where deceased was non-UK domiciled
• jointly owned property
• severing a joint tenancy after death
• estates that are still being administered
If you have already received the inheritance and spent some of the money that you intend to redirect under a Deed of Variation then this is still possible, but, of course, you will need to make sure that you have other money/assets available to fully satisfy the amount that you are giving.
Deed of Variation vs Disclaimer — Which is right for you?
Deed of Variation
- The ability and flexibility to redirect the benefit of an inheritance to someone of your choosing
- You get to decide where the money is to be redirected to
- It doesn’t matter if you have already received a benefit from the inheritance or the inheritance itself
- Can be used to redirect just some of the inheritance
- Good tax planning tool
Disclaimer
- A straightforward refusal to accept the inheritance
- No control over where the money is to be redirected as it passes automatically to the next person in line to inherit under the Will or Intestacy Rules
- Once an inheritance has been accepted you cannot then disclaim it
- Must disclaim the full amount of the inheritance
- Limited use for tax planning
A solicitor would usually recommend a Deed of Variation where you wish to have a say over where the inheritance should be redirected to and if the redirection is being considered for tax purposes. A Disclaimer would be recommended if a beneficiary simply does not wish to receive any of the inheritance and has no desire to decide where it should be redirected to or to take advantage of any potential tax planning benefits.
Disclaimers must be completed within two years of the deceased’s death and Deeds of Variation must be done within two years of the deceased’s death if they are to be read back for tax purposes. Neither route needs to be particularly complicated or costly, but it does depend on the facts of the situation, and of course, there will be occasions where further tax advice needs to be sought as a part of the process.
How to start the process
If you are considering a Deed of Variation, your solicitor will want to know about the value of your estate in order to determine your own inheritance tax position and they will also want to see the Deceased’s Will and know about the make up of their estate and the amount of your inheritance.
It is not always necessary to involve the Executors or other beneficiaries in this process, and it very much depends on what the variation is, who it affects and whether it affects the estate’s tax position.
If the estate’s tax position is affected by the variation and more tax needs to be paid, then HMRC will need to be notified and will want to see the Deed of Variation. Similarly, if there is to be a tax refund.
Typically, a Deed of Variation costs around £500 plus VAT at Timms Solicitors, but again this depends on the complexity.
How Timms Can Help
Refusing or redirecting an inheritance isn't as unusual as it sounds, and for the right person it can be a genuinely valuable piece of planning, saving tax, protecting family wealth, and making sure a loved one's legacy ends up where it can do the most good.
But the rules are unforgiving: miss the two-year window, overlook a tax statement or accept a benefit you shouldn't have and the opportunity is lost. That's why it pays to take advice early, ideally as soon as you know an inheritance is coming your way.
If you'd like to talk through your own situation, our Wills & Probate team at Timms is here to help. You can contact me, Charlotte Day, directly on 01283 214231 or by email at c.day@timms-law.com or get in touch with any of our offices in Ashby de la Zouch, Swadlincote, Burton upon Trent or Derby to arrange a confidential, no-obligation conversation
Frequently Asked Questions
Can I change my mind after accepting an inheritance?
Once you’ve accepted an inheritance, or taken any benefit from it, you can no longer disclaim it. You may, however, still be able to redirect the asset using a Deed of Variation, provided you act within two years of the death and the other conditions are met.
Can a Deed of Variation be made after 2 years?
You can still sign a Deed of Variation after two years but it will lose the special ‘reading back’ treatment for Inheritance Tax and Capital Gains Tax. The redirection then counts as a lifetime gift from you with the usual 7-year rule and potential tax consequences.
Do I need probate to be granted first?
No. A Deed of Variation can be prepared and signed before the Grant of Probate is issued. What matters is that the deed is executed within two years of the date of death and meets the statutory conditions, not the stage the estate administration has reached.
Can I redirect part of an inheritance and keep the rest?
Yes. A Deed of Variation can apply to all, part, or just a specific asset within your inheritance. For example, you could keep a cash legacy and redirect a property to your children or pass on only a percentage share of the residue.
Does a Deed of Variation affect the original Will?
No. The original Will remains legally valid and unchanged. A Deed of Variation is a separate document signed by the beneficiary that redirects their share. For tax purposes only, the law treats the new destination as if the deceased had written it into the Will themselves.
Can the executors refuse to cooperate?
Executors generally don’t need to consent to a Deed of Variation, as the gift belongs to the beneficiary once it vests. Their signature is only required if the variation increases the Inheritance Tax payable by the estate. Otherwise, the beneficiary can proceed independently with their solicitor.
Will HMRC challenge a Deed of Variation?
HMRC accepts Deeds of Variation that meet the statutory conditions in s.142 IHTA 1984 and s.62(6) TCGA 1992. Challenges typically arise only where the deed is late, lacks the required tax statements or where the beneficiary has received consideration in return for redirecting the gift.
