Contrary to popular belief, a will may be effectively changed after a person’s death.
Entering a deed of family arrangement (DFA), also called a deed of variation, is a way to vary the terms of a will. This agreement can be established provided that all interested parties come to a consensus on a particular outcome.
A DFA is a viable option in certain circumstances where a consensus can avoid the costly and time-consuming litigation process in courts.
Doubts About The Meaning Of The Will
There is no guarantee that the deceased person was in a sound state of mind when drafting the will or had received legal assistance. Using a DFA, interested parties can amend any uncertainties in a way that is most favourable to them rather than judgements from courts.
Redistributing The Estate
Beneficiaries may wish to redistribute the estate amongst themselves or may need to change the allocation of assets if new parties are added to the will. Although the specifics of succession law differ amongst the states, an interested party with a close personal relationship with the will-maker can apply to contest the will if they are left out.
Deliberate exclusions written into the will and long estrangements may not be enough to prevent a claim from succeeding. The court will weigh up financial circumstances, disabilities, age and the nature of the relationship to reach a decision. If the claim by the interested party is likely to succeed, a DFA will amend the will with greater resource efficiency than the courts.
Block A Challenge To The Will
If an interested party not listed as a beneficiary seeks to challenge the will, a DFA may come in handy. The deed can be used to compromise a claim against the estate agent where there is a challenge to the will. However, this rule differs in states like Queensland and Victoria, where parties cannot contract out of their rights to bring a family provision claim.
Create An Estate Proceeds Trust
An estate proceeds trust (EPT) allows the movement of assets between beneficiaries to occur in the most tax-effective way. Remember that under current tax legislation, a person receiving property via a will from a deceased individual has three years from the death of the deceased to transfer the property to the EPT.
Eligibility And Document Checklist:
Legal advice would be helpful to obtain before drafting a DFA. Follow this checklist once the decision is made to ensure your document is binding and complies with taxation legislation.
- All interested parties, beneficiaries and the executor should sign the deed to demonstrate the mutual consent of all involved.
- In certain states, the court may approve the document, providing certainty.
- No adverse Capital Gains Tax consequences will be incurred if requirements of section 128-20(1)(d)(i) of the Income Tax Assessment Act 1997 are met.
- Applying for eligible concessions minimises any Stamp Duty (if eligible) triggered by the agreement.
