What is a Deed of Family Arrangement?

A Deed of Family Arrangement is a legal document that changes how assets of a deceased person’s estate are distributed.

This may be an alteration to the provisions of a Will or where no Will exists, to alter the provisions of the intestacy rules.

If the terms of a Will or the rules of intestacy are in dispute by the parties who stand to benefit from an estate, and if they can agree on how the assets are to be divided, a Deed of Family Arrangement can be drawn up to formalise this agreement.

If drawn up properly, this ought to prevent any potential for future claims against the estate and will protect executors (or administrators) from beneficiaries who might change their minds in the future.

Entering a Deed of Family Arrangement

To enter a Deed of Family Arrangement:

All parties must agree to the terms;
They must be at least eighteen years of age;
They must have the mental capacity to sign; and
The executor (or administrator) must also sign to give effect to the document.

Parties to a Deed of Family Arrangement are usually the named beneficiaries of an estate, however, this does extend to any party who has a claim to a distribution from the estate, such as the creditors, executors, and trustees of the estate.

Stamp Duty or Capital Gains Tax implications may apply.

Deed of Family Arrangement Examples

Listed below are a few examples:

To Prevent an Inheritance Claim

If a person entitled to make an inheritance claim is dissatisfied with being left out of a Will, or with the portion they have been gifted, they could challenge the Will.

Alternatively, if that person can agree with the other beneficiaries to reapportion the estate to their mutual satisfaction, a Deed of Family Arrangement is used to formalise the new apportionment.

To Alter Terms of the Will

A Deed of Family Arrangement can also be useful when beneficiaries want to change the terms of the Will.

One beneficiary might want to keep a property that had to be sold to satisfy gifts under a Will.

A Deed of Family Arrangement could be drawn up to provide that this beneficiary acquires the property in exchange for buying out the other beneficiaries to the value of their anticipated benefit.

To Alter the Rules of Intestacy

It can be problematic where no Will exists and the relevant rules of intestacy according to the law are used to distribute the assets of an estate.

For instance, if the deceased leaves a partner who resides in the deceased’s home, but under the rules of intestacy, that partner has no claim to the estate.

This could force the partner from that home to satisfy what is owed to the entitled beneficiaries of the estate.

A Deed of Family Arrangement can be drawn up to provide a right to reside in that home for that partner, with the beneficiaries postponing receipt of their entitlement until this right concludes.

When a Deed of Family Arrangement cannot be used

If a benefiting party lacks mental capacity or is under the age of eighteen years, a Deed of Family Arrangement cannot be used to reduce or alter estate entitlements.

It also cannot be used to avoid a claim being pursued under the Inheritance (Family Provision) Act 1972 (SA).