14 Jul Deeds of Family Arrangement and Deceased Estates
When a loved one passes away, dealing with their estate can often become complicated and difficult to navigate—especially if there are disputes between beneficiaries or a desire to alter the distribution set out in the will.
In South Australia, one useful tool that can be used to resolve such issues is a Deed of Family Arrangement.
This blog explains what a Deed of Family Arrangement is, when it can be used, and what to be aware of when considering this approach in administering a deceased estate.
What is a Deed of Family Arrangement?
A Deed of Family Arrangement is a legally binding agreement made between the beneficiaries of a deceased estate that varies the distribution of that estate from the terms set out in the will or under the rules of intestacy.
It can also be used to resolve disputes or potential claims in relation to an estate, including family provision claims under the Succession Act 2023 (SA).
Rather than relying on a court to determine how the estate should be divided, the beneficiaries and other relevant parties come to their own agreement—allowing for a quicker, more cost-effective, and often more amicable resolution.
When can a Deed of Family Arrangement be used?
A Deed of Family Arrangement may be appropriate in the following situations:
- To resolve disputes between beneficiaries over the distribution of assets.
- Where the will is unclear or ambiguous, and the beneficiaries wish to agree on an interpretation.
- To vary the terms of the will in a way that better reflects the wishes of the family or a compromise between competing claims.
- To address potential or actual family provision claims (e.g. where a child or partner believes they have been unfairly left out).
- To restructure entitlements for taxation, asset protection, or Centrelink planning reasons.
Who must be parties to a Deed of Family Arrangement?
For a Deed of Family Arrangement to be valid:
- All beneficiaries who are affected by the change must agree and sign the deed.
- The executor or administrator of the estate must also be a party to the deed.
- If any party is under the age of 18 or lacks legal capacity, a court order is usually required for the arrangement to be valid.
- In the case of intestacy, the agreement must include all persons entitled under the laws of intestate succession.
Tax and Stamp Duty Considerations
There are important taxation and duty implications to consider:
Capital Gains Tax (CGT)
A variation of an estate by way of a Deed of Family Arrangement may trigger CGT consequences if assets are disposed of or exchanged.
However, the ATO provides administrative concessions in certain cases where the arrangement is made to settle a genuine dispute or family provision claim.
Stamp Duty on Transfers of Land
In South Australia, a transfer of real property under a Deed of Family Arrangement may attract stamp duty if the transfer is not in accordance with the terms of the will or intestacy.
The Commissioner of State Taxation will assess the transaction to determine whether a duty exemption applies.
Legal advice should always be sought before entering into such a deed, particularly where real estate or other high-value assets are involved.
Formal requirements and best practice
A Deed of Family Arrangement should be:
- In writing and executed as a deed.
- Properly drafted by a legal practitioner, as the language used can have significant legal and financial implications.
- Signed by all relevant parties in the presence of a witness.
- Supported by independent legal advice for each party (this helps to ensure the deed is enforceable and reduces the risk of future challenges).
It may also be necessary to have the deed lodged with the Probate Registry or disclosed during administration if it affects the distribution of assets.
Case Study Example
Scenario: Joan passes away, leaving a will that gifts her house to her son, Mark, and the remainder of her estate to her daughter, Sarah. The house represents 90% of the estate’s value, and Sarah feels unfairly treated. Rather than commence proceedings further provision under the Succession Act 2023 (SA), the siblings negotiate a Deed of Family Arrangement in which the house is sold and the proceeds split equally.
Outcome: The arrangement is documented in a deed, signed by both parties and the executor. This avoids costly litigation and maintains the family relationship.
Advantages of a Deed of Family Arrangement
- Flexibility to tailor an agreement that works for the specific circumstances.
- Avoids litigation, saving time and cost.
- Private resolution, as opposed to a public court battle.
- Can help preserve family relationships that might otherwise be destroyed by legal disputes.
Risks and Cautions
- May be unenforceable if not properly drafted or executed.
- Can trigger tax or duty liabilities.
- Minors and incapacitated persons cannot bind themselves—court approval is required.
- Possibility of future claims if all relevant parties are not properly involved or advised.
Summary
A Deed of Family Arrangement can be a powerful tool in the administration of a deceased estate in South Australia. It provides a flexible and private way to resolve disputes, vary distributions, or deal with complexities in a will or intestacy.
However, the risks—particularly legal, tax and duty implications—mean it is critical to seek proper legal advice before proceeding. A well-prepared deed, crafted with the guidance of an experienced wills and estates lawyer, can avoid costly court proceedings and bring peace of mind to families during difficult times.
If you are involved in a deceased estate and need advice about a Deed of Family Arrangement please call Di Rosa Lawyers on 08 8276 7955 or make an online enquiry by clicking this link: Contact – Di Rosa Lawyers
This blog is published by Di Rosa Lawyers for informational purposes only and is not considered legal advice on any subject matter. By reading and re-publishing the blog, you acknowledge that there is no solicitor-client relationship between you and Di Rosa Lawyers. This blog should not be used as a substitute for legal advice from a legal practitioner who specialises in the area and you are urged to consult us or seek your own independent legal advice on any specific issue or matter.
