Those entitled to the estate of the deceased can vary how it is distributed or disclaim their entitlement, as long as they do so within 2 years of death. This variation then takes effect as if that was the case on death. These variation can be used to reduce the amount of Inheritance Tax Payable. Everyone concerned must consent to the variation.

For example, a deed of variation or disclaimed could be used where an estate of say £600,000 has been left to the surviving spouse without any use being made of the deceased's nil rate band of £285,000. If this amount of the estate was instead diverted to the children, then it would not form part of the estate liable to IHT on the death of the surviving spouse. This could save £114,000 in IHT!

There are many other more complex situations in which deeds of variation can be used to save IHT. However, they really are a last ditch tax planning strategy. Better to get it right in the first place.

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