Deeds of Family Arrangement

Deeds of Family Arrangement

When a person dies their assets will generally be distributed in accordance with the wishes that they record in their Will, or, if they don’t have a Will, by the laws of intestacy.

In Queensland, if the deceased has a surviving spouse but no children, then the entire estate will go to the spouse. If there are children, then the surviving spouse will receive the first $150,000 of the estate, and any household chattels, and will divide the balance of the estate with the children of the deceased. If there is only one child, the spouse will divide the residuary estate with the child in equal shares. If there is more than one child, the spouse will inherit one-third of the residual estate, and the remaining balance will be divided equally amongst any children. Where the deceased does not have a surviving spouse but is survived by issue, the children will inherit the intestate estate in equal shares. If there are no children and no spouse then the estate will be distributed successively to parents, then brothers, sisters, nephews, nieces, then grandparents, then uncles aunts and cousins, and then lastly, the crown.

A deed of family arrangement is a document recording the distribution of an estate where the distribution is not made in accordance with a Will or the laws of intestacy.

It legally changes the way a deceased person’s assets are divided between the beneficiaries. It can either change the terms of a Will or change the distribution under the rules of intestacy.

A deed of family arrangement can also provide the personal representative of the estate (which means either the executor or administrator) with protection from any future claims.

In order for a deed of family arrangement to be valid, it must be:

  • Signed by the legal personal representative; and
  • Signed by and have the consent of all the beneficiaries (aged over 18 years) entitled under the original will, or entitled under intestacy rules (if there is no will).
When to use a deed of family arrangement?

1. When beneficiaries want to change the terms of the Will.

The will may not be suitable to the needs of the beneficiaries. For instance, the Will may be very old and may not have been adjusted to take into account the births and deaths that have taken place in the years since the Will was signed. Also a beneficiary may have no need for the inheritance left to them and instead want other family members to take that inheritance.

2. When beneficiaries don’t want the ‘rules of intestacy’ to determine distribution of an estate.

In Queensland, the spouse of the deceased will generally be entitled to the majority of assets, including what’s called a ‘pecuniary legacy’. This is essentially an amount of money taken from the estate and gifted to the spouse. In Queensland this legacy is $150,000.

The partner will be entitled to this automatically, regardless of how much the estate is worth. If it is valued under $150,000, the partner will receive everything from the estate. In this case the family may decide to split the estate so that the children of the deceased receive something.

Another example is where the rules of intestacy would result in the spouse having to sell their home in order to pay out the children of the deceased in accordance with the intestacy laws. A Deed of Arrangement could be utilised to set out that the Spouse can retain the house.

3. On the challenge of a Will

If a dependent of the deceased is unhappy with the Will, they may be minded to challenge it through the Courts. This can be a time-consuming and expensive process for all involved. In the event that the relevant parties can reach Agreement rather than having the court make a decision then this can be documented through a deed of family arrangement.

Capital Gains Tax (CGT) Considerations:

Under Australian taxation law, the passing of an asset to a beneficiary of a deceased estate will be exempt from capital gains tax. This is governed by section s128.20 of the Income Tax Assessment Act 1997 (Cth).

It’s also possible for a deed of family arrangement to be covered by this exemption, however, it will only be exempt if the deed is used to settle a claim to participate in the estate (such as a family provision claim). The ATO ruling ‘TR 2006/14’ gives us further guidance as to this exemption.

If the deed does not meet the requirements of the above ruling, CGT may apply.

Transfer/Stamp Duty:

There may also be stamp duty (e.g. transfer duty) issues to consider when writing a deed of family arrangement.

Generally, the transfer of an asset from an estate will be exempt from stamp duty in Queensland however where property is being received through a deed of family arrangement the circumstances relating to that may mean that Stamp Duty still needs to be paid. The Queensland Treasury’s “Public Ruling DA124.1.1 Distribution in the estate of deceased person—power to appropriate” provides guidance in respect to this.

Should you wish to discuss whether a Deed of Family Arrangement is suitable in your circumstances or for any other Will or Estate related enquiries please do not hesitate to contact the team at Miller Sockhill Lawyers in Maroochydore.


Sunshine Coast Lawyers

Check out some of our other resources including information on Have you been adequately provided for in your loved one’s Will?Spousal MaintenanceWhat happens if I die without a will?