Information Centre · Wills & Deceased Estates
Can Beneficiaries Change a Will After Death? Deeds of Family Arrangement in Victoria
When beneficiaries can agree to vary the distribution of an estate after death — and the legal, duty and tax issues that executors and beneficiaries should consider first.
Key points
- A Deed of Family Arrangement is a contract between beneficiaries (and usually the executor) recording their agreement to redirect or rearrange the beneficial interests they take under a Will or on intestacy; the Will itself is not amended and continues to be the instrument under which probate is granted.
- A Deed of Family Arrangement is a contract that binds its parties; it requires signature by every person whose rights or entitlements are being altered by the deed, or by a representative with authority to bind that person. Minors, beneficiaries who lack capacity, and unborn or unascertained beneficiaries cannot consent personally, and effective participation requires an appropriately authorised representative or a Court order.
- Section 42 of the Duties Act 2000 (Vic) may exempt transfers of dutiable property to a beneficiary of a deceased estate where the transfer is in conformity with the Will or the rules of intestacy; whether a transfer under a Deed of Family Arrangement falls within section 42 depends on the structure of the deed, the transferee and current State Revenue Office practice.
- The main residence and other CGT concessions in the Income Tax Assessment Act 1997 (Cth), and the general rollover for assets passing from a deceased estate under Division 128, may apply where a beneficiary takes as beneficiary of the estate; a deed that effectively transfers an asset from one beneficiary to another for value, or directs an asset to a non-beneficiary, can trigger a CGT event.
- An executor asked to participate in a deed must consider fiduciary duties, any conflict of interest, the position of every affected beneficiary, whether independent advice has been obtained, and whether the deed exposes the executor to personal liability; judicial advice or directions may be sought in cases of doubt.
- A deed does not bind creditors, revenue authorities, secured lenders or other non-parties; estate liabilities must be dealt with in accordance with the executor's obligations, and a poorly documented deed may be exposed to challenge on grounds such as lack of capacity, undue influence, mistake or breach of fiduciary duty.
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A Deed of Family Arrangement (DFA) is a contract between the parties to it — usually the beneficiaries (and the executor) of a deceased estate. It does not amend the Will, replace a grant of probate or letters of administration, or authorise an executor to disregard the applicable succession, revenue or tax law. A DFA affects only the rights the parties themselves control, and its operation depends on the parties' capacity, the assets involved and the terms in which the deed is drafted.
In Victoria, beneficiaries may in appropriate cases agree by deed to redirect or rearrange the beneficial interests they take under the Will or on intestacy. Used with care, a DFA can resolve practical problems and reduce the risk of disputes. Without care, it can create duty, capital gains tax and fiduciary problems that were not intended. This article outlines how DFAs work in Victoria and what should be considered before one is signed.
What Is a Deed of Family Arrangement?
A Deed of Family Arrangement is a written agreement between the beneficiaries of an estate (and usually the executor) which varies the way the estate would otherwise be distributed under the Will or on intestacy.
A DFA does not change the Will itself. The Will remains the legal document under which probate is granted. Instead, the deed records the beneficiaries' agreement that, having become entitled to certain interests in the estate, they will redirect or rearrange those entitlements in a different way.
A DFA is a contract that binds its parties. For the arrangement to be effective it needs to be signed by every person whose legal rights or entitlements are being altered by the deed, or by a representative with authority to bind that person. Where a beneficiary is a minor, lacks capacity, or is unborn or unascertained, effective participation requires an appropriately authorised representative or a Court order, and in some cases Court approval is required before that interest can be affected. Where no such authority is in place, the original terms of the Will continue to govern the interest of the person who is not a party.
Why Would Beneficiaries Use a Deed of Family Arrangement?
Deeds of Family Arrangement may be used where the strict application of the Will would produce an outcome that is impractical, inconvenient or contrary to what the family considers fair. Typical examples include:
- Allocating specific assets: one beneficiary takes a particular property while another receives additional cash or shares of equivalent value.
- Equalising inheritances: adjusting shares to take into account significant gifts or financial assistance provided during the deceased's lifetime.
- Keeping an asset within the family: preserving a farm, family home or business interest in a particular branch of the family.
- Practical administration: avoiding the need to sell an indivisible asset where one beneficiary wishes to retain it.
- Resolving or pre-empting disputes: settling a foreshadowed family provision claim or addressing dissatisfaction with the Will before litigation begins.
A DFA is not a substitute for proper estate planning, but it can be a valuable tool when applied to the actual circumstances of a family after death.
Consent, Capacity and Authority
A DFA can bind only rights that the parties to it actually control. Adults with capacity may contract about their own beneficial interests. Others cannot be made to release or transfer their entitlements simply by the signatures of the adults.
- Minors and beneficiaries who lack capacity: cannot personally consent. A properly authorised representative (for example, an administrator appointed by VCAT under the Guardianship and Administration Act 2019 (Vic), or a trustee for a minor) may be required, and Court approval may be required in some cases.
- Unborn and unascertained beneficiaries: may hold contingent or future interests (for example, under a life interest or a class gift). Their interests cannot be varied by the adults' agreement alone; appropriate representation or Court sanction may be needed.
- Superannuation trustees: deal with death benefits under the fund's governing rules and the Superannuation Industry (Supervision) Act 1993 (Cth). Trustees are not parties to a DFA and their decisions are not displaced by one, unless the benefit has been paid to the estate.
- Other non-parties: creditors, revenue authorities and secured lenders are not bound by a deed to which they are not parties.
A DFA is distinct from other estate instruments and proceedings:
- a release is a unilateral relinquishment of a claim;
- a disclaimer refuses a gift before it is accepted, so that it never vests in the beneficiary;
- an assignment transfers a beneficiary's accrued interest to another person;
- a deed of settlement compromises a dispute on defined terms;
- a Court-approved compromise is a settlement approved or ordered by the Court, which may be required where a party's interests cannot be dealt with by contract alone.
A DFA also sits alongside distinct forms of estate proceeding: a Part IV family provision claim, a probate-validity challenge, a construction or rectification application, an informal-Will application and an administration dispute each have their own framework and cannot simply be resolved by a deed between beneficiaries.
What Risks Should Executors Consider?
An executor approached with a proposed Deed of Family Arrangement should take particular care before signing. The executor's role is to administer the estate in accordance with the Will, not to facilitate rearrangements that suit some beneficiaries at the expense of others.
Issues that require careful attention include:
- Fiduciary duties: the executor must act in the best interests of the estate as a whole and the beneficiaries collectively, and must not prefer one beneficiary over another.
- Conflicts of interest: particular caution is required where the executor is also a beneficiary whose entitlements are increased by the proposed arrangement.
- Executor-beneficiaries: where the executor is both fiduciary and beneficiary, the conflict should be acknowledged in the deed and managed by ensuring other beneficiaries have independent advice.
- Transfers to related parties: assets redirected to a beneficiary's spouse, children, company or trust require additional scrutiny and may raise duty and tax issues that would not arise on a direct transfer.
- Informed beneficiary consent: every beneficiary affected by the deed should understand what they are giving up and what they are receiving in return. A signature obtained without proper explanation is unlikely to bind the beneficiary if later challenged.
- Release and indemnity: a well-drafted DFA includes appropriate releases by the beneficiaries in favour of the executor and, where appropriate, mutual indemnities between beneficiaries to deal with any liabilities that emerge after distribution.
- Independent legal advice: the executor should generally insist that each beneficiary obtain their own legal advice before signing, both to protect the beneficiary and to reduce the risk of the deed later being set aside.
An executor who participates in a poorly considered DFA may face personal exposure if a beneficiary later argues that they were misled, pressured or insufficiently informed.
Duty and Taxation Considerations
An important reason to obtain advice before signing a Deed of Family Arrangement is the potential application of Victorian land transfer duty (stamp duty) and Commonwealth capital gains tax.
Section 42 exemptions
Under the Victorian Duties Act 2000, certain transfers of dutiable property to a beneficiary of a deceased estate may be exempt from duty under section 42, provided the transfer is made in conformity with the Will (or the rules of intestacy) and certain other requirements are satisfied.
The exemption can extend to transfers made under a Deed of Family Arrangement, but only where the arrangement falls within the parameters recognised by the State Revenue Office. Where the deed redirects property to a person who would not have taken under the Will at all, or to a related entity rather than the named beneficiary, the exemption may not apply.
"Each Asset" and "All Assets" approaches
In practice, Victorian DFAs may be analysed against two broad approaches:
- The "Each Asset" approach: each individual asset is treated separately, with each beneficiary either receiving their proportionate interest in that asset or surrendering it to another beneficiary. This approach is generally easier to fit within the duty exemption framework.
- The "All Assets" approach: beneficiaries treat the estate as a pool and rearrange entitlements across the whole pool, often with one beneficiary taking a particular asset in exchange for less of another. This approach offers greater flexibility but is more likely to be characterised as involving consideration moving between beneficiaries, which can affect both duty and capital gains tax outcomes.
Real property
Where the deed deals with Victorian real estate, careful structuring is required so that any transfer to a beneficiary falls within the section 42 exemption. Transfers to a beneficiary's spouse, children, company or trust will generally not be exempt and may attract duty assessed on the full value of the property.
Shares and other assets
Transfers of shares, units and similar interests can raise their own duty issues, particularly where the underlying entity is land-rich. The treatment depends on the asset and on the precise structure of the deed.
Capital gains tax
Assets passing from a deceased estate to a beneficiary are generally subject to specific CGT rules, including rollover relief in defined circumstances. A Deed of Family Arrangement may preserve those concessions, or it may inadvertently trigger a CGT event — for example, where one beneficiary effectively acquires an asset from another in exchange for value.
The above is general information only. The duty and tax consequences of a DFA depend on the particular facts and on the law and revenue office practice in force at the time. The parties should consider whether legal and accounting advice tailored to their positions is appropriate before the deed is executed.
Should Beneficiaries Obtain Independent Advice?
In most cases, yes. Independent legal advice is particularly important where any of the following are present:
- Unequal distributions: the deed results in some beneficiaries receiving materially more or less than they would have under the Will.
- Vulnerable beneficiaries: a beneficiary is elderly, unwell, financially inexperienced or otherwise in a position where informed consent cannot safely be assumed.
- Family conflict: tensions between family members create a risk that a beneficiary may sign under pressure rather than out of genuine agreement.
- Surrender of valuable rights: the deed involves a beneficiary giving up significant entitlements, including potential family provision claims.
Where a party has taken independent advice, that advice — and any record of it in the deed — is a factor the Court may consider when assessing later questions about the deed's formation and effect. Where a party has not, the deed should record that position accurately.
Frequently Asked Questions
Does a Deed of Family Arrangement change the Will?
No. A Deed of Family Arrangement does not amend the Will. The Will remains the instrument under which probate is granted and by which the beneficial interests in the estate are determined. A deed records an agreement between beneficiaries (and usually the executor) that, having become entitled to those interests, they will redirect or rearrange them by contract. The distinction matters for succession, duty and tax analysis.
Who has to sign a DFA?
A DFA is a contract that binds its parties. For the arrangement to be effective it needs to be signed by every person whose legal rights or entitlements are being altered by the deed, or by a representative with the authority to bind that person. The executor is ordinarily a party where estate assets are to be dealt with. Where a beneficiary is a minor, lacks capacity, or is unborn or unascertained, that person cannot consent personally; effective participation requires an appropriately authorised representative or a Court order, and in some cases Court approval will be required to bind that interest.
Is a DFA exempt from Victorian land transfer duty?
Not automatically. Section 42 of the Duties Act 2000 (Vic) provides an exemption for certain transfers of dutiable property to a beneficiary of a deceased estate where the transfer is made in conformity with the Will or the rules of intestacy. Whether a particular transfer under a DFA falls within section 42 depends on the precise structure of the deed, the identity of the transferee, and current State Revenue Office practice. Transfers to a beneficiary's spouse, related trust, company or other person who would not have taken under the Will may fall outside the exemption and may attract duty on the full unencumbered value.
What are the CGT consequences of a DFA?
The main residence and other CGT concessions in the Income Tax Assessment Act 1997 (Cth), and the general rollover for assets passing from a deceased estate to a beneficiary in Division 128, may apply where the beneficiary takes the asset as beneficiary of the estate. A DFA that effectively transfers an asset from one beneficiary to another for value, or that directs an asset to a person who is not a beneficiary, can trigger a CGT event. Advice on the specific structure and the parties' positions is essential before the deed is executed.
Can a DFA settle a foreshadowed family provision claim?
Yes, subject to appropriate steps. Where a person is considering a family provision claim under Part IV of the Administration and Probate Act 1958 (Vic), the parties may record a compromise in a deed and, in appropriate cases, seek approval or an order of the Supreme Court. Independent legal advice is important for both the claimant and the beneficiaries whose interests are affected, and the deed should address release of the claim, costs and any related indemnities.
Does an executor have to agree to a DFA?
The executor's role is to administer the estate in accordance with the Will and the general law, not to prefer particular beneficiaries. An executor asked to participate in a DFA should consider fiduciary duties, any conflict of interest (particularly where the executor is also a beneficiary), the position of every beneficiary affected, whether independent advice has been obtained, and whether the deed exposes the executor to personal liability. Where the executor is in doubt, application may be made for judicial advice or directions.
Can a beneficiary who lacks capacity be bound by a DFA?
Not by contract alone. A beneficiary who lacks capacity, or a minor, cannot give effective consent to a deed. Where the estate includes an interest for such a person, a representative with appropriate authority (for example, an administrator appointed by VCAT or a trustee for a minor) must be involved, and in some cases Court approval will be required. Proceeding without addressing capacity issues risks the deed being unenforceable as against that beneficiary.
Are creditors and other third parties bound by a DFA?
A DFA is a contract between its parties. It does not bind creditors of the estate, the Australian Taxation Office, the State Revenue Office, secured lenders, or other persons who are not parties. Estate liabilities must be dealt with in accordance with the applicable law and the executor's obligations to creditors. A deed that ignores creditor claims exposes the executor and beneficiaries to later recovery action.
What documents should support a DFA?
A well-supported DFA is accompanied by a copy of the Will and the grant, a statement of estate assets and liabilities, records of any advice each party has taken and of any disclosures of conflict of interest, appropriate releases and indemnities, and — where property is being transferred — the documents required by the State Revenue Office and the Registrar of Titles or ASIC. Where a party has not taken independent advice, the deed should record that position accurately rather than assume otherwise. Poorly documented deeds are more likely to attract duty, tax and successor issues.
Can a DFA be set aside later?
Yes, in defined circumstances. A deed may be attacked on grounds such as lack of capacity, undue influence, mistake, misrepresentation, unconscionable conduct or breach of fiduciary duty. Careful process — full disclosure, considered advice for the parties, clear drafting, appropriate acknowledgments and formal execution — supports the resilience of the deed on its facts, though it cannot guarantee that a later challenge will not be brought.
Key Takeaways
A Deed of Family Arrangement can be a useful tool for executors and beneficiaries dealing with the practical realities of an estate. It can provide flexibility, preserve important family assets and reduce the risk of future disputes.
It should not, however, be treated as a simple administrative document. A DFA can have significant legal, duty and tax consequences for the executor and every beneficiary involved.
Before any Deed of Family Arrangement is signed, executors and beneficiaries should obtain legal and, where appropriate, taxation advice to ensure the proposed arrangement achieves the intended outcome without creating unintended liabilities.
If you require advice regarding a Deed of Family Arrangement, deceased estate administration or executor's duties in Victoria, contact Parke Lawyers for assistance.
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This article is general information only and does not constitute legal advice. Please obtain advice tailored to your circumstances.