A Deed of Family Arrangement is not required in every Estate matter and is ordinarily used in limited circumstances, such as the following:-
1. Where the beneficiaries wish to vary the terms of the Will. For example:
- If a Will provides that a property is to be sold, however, one beneficiary wishes to retain the property and make payment of the other beneficiaries shares to them; or
- A beneficiary wishes to pass on their share of the Estate to their children.
2. When there is no Will and parties wish to vary the rules of intestacy. The rules of intestacy provide a list of beneficiary classes to an Estate in the absence of a Will, including spouses, children, grandchildren, parents, siblings etc. For example:-
- In some circumstances, potential beneficiaries will seek that an Estate does not follow these rules, rather than an Estate is divided between a spouse and the children for example.
3. When someone wishes to challenge a Will as they are unhappy with what they have or haven’t received from the Estate. In these circumstances, the unhappy beneficiary may make a Family Provisions Claim to the Supreme Court of New South Wales, which can be a lengthy and costly process.
To avoid this, the beneficiaries and Executors can come to their own agreement that addresses these concerns and distributes the Estate in a different way.
When can a Deed of Family Arrangement not be used?
However, there are circumstances where even if the above occurs, a Deed of Family Arrangement is not possible, this may be in circumstances where the entitlement of a minor is being reduced, or the entitlement of a person suffering from an intellectual disability or otherwise does not have mental capacity to enter into the agreement.
If such a change needs to be made in these circumstances, it would need to be done by way of Court Order.
If I’m transferring property under a Deed of Family Arrangement, will I need to pay Stamp Duty?
In some Deeds of Family Arrangement, there may be stamp duty issues to consider. However, if you are seeking to retain real property from an Estate and make payment to the other beneficiaries of their share, there may be some concessions relating to this.
Ordinarily, you will only need to pay stamp duty on the value of the property that you would not have otherwise received under the Estate. For example, if you were receiving 25% of a property under the Estate, you would only need to pay stamp duty on the remaining 75%.
However, stamp duty and the respective concessions can be complicated and be on a case by case basis, so we recommend speaking with a specialised tax agent regarding this.
Are there any other benefits of a Deed of Family Arrangement?
If you are acting as the Executor or Administrator of the Estate, a Deed of Family Arrangement may provide you with protection from any future claims.
There are a number of procedural requirements for a Deed of Family Arrangement and its use will be on a case by case basis. If you think a Deed of Family Arrangement would benefit you, please do not hesitate in contacting one of our team for more information on 02 4655 4224.
