There are times when the terms of a deceased’s will are not suitable and the beneficiaries involved seek to have the will varied. There are various situations where this may be the case, such as changing circumstances over a long period of time from when the will was first drafted, or an estrangement between family members is healed (or vice versa).
This is where a deed of family arrangement can be utilised, however it is an option that requires all interested parties to agree on the outcome. This can however result in settlement outside of litigation, which can tie up an estate for months or even years.
Deeds of family arrangement can be used in a number of circumstances, such as:
where there are doubts about the meaning of a willwhere the beneficiaries wish to rearrange the distribution of the estate between themselvesto compromise a claim against the estate where there is a challenge to the willto create an estate proceeds trust under taxation legislation.
On that last point, note that an estate proceeds trust (EPT) is a trust established by a deed after the death of a person for the purposes of receiving property from that person’s estate. Under the 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. The distinction between an EPT and a testamentary trust is that an EPT is established by a beneficiary, but a testamentary trust is established by the deceased person’s will.
Where the will is varied through a deed of arrangement, which meets certain requirements, generally the parties may disregard the resulting capital gains or losses (and some other guidance on CGT can be found in TR 2005/14).
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Care needs to be taken however as there can be some variation on the rules from state to state, such as stamp duty. There may be other state-based laws in this regard, so relevant sources of information need to be used.
Note also that a deed of family arrangement that would act to reduce the benefits accruing to a minor or a disabled person may require court approval.
But as with a lot of matters dealing with deceased estates, care needs to be taken with any deed of arrangement, and the advice of a professional is highly recommended.
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# [beneficiary], [deceased estate], [trusts], [will]
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