What is a Deed of Family Arrangement?

When a Legal Representative administers an Estate, their job is to ensure that the deceased’s assets are distributed either in accordance with the terms of the Will, or in accordance with the laws of intestacy when there is no Will.

There are certain circumstances which would provide reason for a Legal Representative to alter the way that the deceased’s assets are distributed. If a Legal Representative alters distribution of an Estate in any way, they should enter into a Deed of Family Arrangement with the beneficiaries, to legally record those changes.

Some circumstances which would provide reason to alter distribution of an Estate include the following:-

1. When a Will is decades old and the deceased has more children after the Will is made and no bequest is left to those children that were born after, a Deed of Family Arrangement should be established if the Legal Representative and beneficiaries agree to include additional distributions to those children;
2. When the deceased died intestate leaving a spouse and children, under Section 70M of the Administration and Probate Act 1958 (Vic), the spouse is automatically entitled to the first $559,660 of the Estate. Now, if the Estate is only worth $350,000, the spouse is entitled to the whole Estate. If the spouse, who is the sole beneficiary, agrees to distribute part of the Estate to the deceased’s children, they should enter into a Deed of Family Arrangement as this would be altering the way distribution is made in accordance with the laws of intestacy;
3. When the deceased leaves everything to their children in their Will and those children have agreed to reduce their own entitlements so that their own children (the deceased’s grandchildren) can receive an inheritance. Because the children of the deceased wish to reduce their own entitlements and include additional distributions, a Deed of Family Arrangement is required; or
4. If the deceased promised a motor vehicle or something similar to a particular person before they had died, but this promise is not mentioned in their Will, the Executor is not entitled to distribute that motor vehicle or other personal item to anyone. The Executor must distribute the assets as per the Will and if a personal item is not specifically bequeathed to anyone, it falls under the residuary estate and should be sold. However, if the beneficiaries acknowledge and agree that a specific bequest should be made, they must enter into a Deed of Family Arrangement as this would diminish their entitlement to the Estate.

More times than not, a Deed of Family Arrangement means reducing the beneficiaries’ entitlements, whether in accordance with the terms of a Will or by the laws of intestacy. If a Legal Representative does not establish a Deed of Family Arrangement before altering distribution of an Estate, they risk a claim being made against them by the beneficiaries.

If you require advice in relation to distribution of an Estate, please contact our office at admin@wslegal.com.au or (03) 9707 1155.