How a Deed of Family Arrangement Works in NSW

A Deed of Family Arrangement (also written as DOFA or DFA) is a contract executed as a deed between all parties with an interest in a deceased estate. The parties typically include every beneficiary named under the will, every person entitled on intestacy, and the executor or administrator.

The deed sets out a revised distribution that all parties accept in place of the will’s terms or the intestacy formula. Once executed, the deed binds those who sign it, and the executor distributes the estate in accordance with the deed rather than the will.

Most deeds also include a release clause. The beneficiaries release the executor from claims arising out of the administration, and they release each other from any further claims on the estate. This is one of the key practical benefits for an executor managing a difficult estate.

When NSW Beneficiaries Use a Deed of Family Arrangement

A deed is used wherever the parties want the distribution to look different from what the will or intestacy rules would deliver, and where everyone is willing to agree:

• Settling a family provision claim: The most common use. An eligible person threatens or commences a family provision claim under Chapter 3 of the Succession Act 2006 (NSW). The parties negotiate, often through mediation, and document the settlement in a Deed of Family Arrangement to avoid a hearing
• Asset-swap arrangements between beneficiaries: Where a will gives several beneficiaries equal shares in mixed assets (for example, a house, shares, and cash), the beneficiaries can swap entitlements so one takes the house and another takes equivalent cash, avoiding the complexity of joint ownership
• Outdated wills: A will drafted decades ago may not reflect later births, deaths, or remarriages. A deed lets the beneficiaries restructure the distribution to suit current circumstances without challenging the will
• Intestacy adjustments: Where there is no will and the intestacy rules deliver an outcome that does not match the family’s preferences, the entitled relatives can agree on a different distribution by deed
• Resolving will validity disputes: Where a caveat or contested probate matter is on foot, the parties can settle by deed and agree to a grant in common form without further litigation

Validity Requirements for an NSW Deed of Family Arrangement

A deed is only effective if it meets the legal requirements for both contract formation and deed execution:

All affected parties must consent

Every beneficiary under the will and every person entitled on intestacy must sign. If one refuses, the deed cannot bind that person, and the executor must follow the will or the intestacy rules for that share.

All parties must be adults with full legal capacity

A minor cannot consent. A person who lacks capacity cannot consent. If either is among the affected parties, Supreme Court approval is required to bind their interest. The Court will only approve where the arrangement is in the minor’s or incapacitated person’s interests.

The deed must be in writing and properly executed

A Deed of Family Arrangement must be in writing, signed, and executed in the form required for a deed under the Conveyancing Act 1919 (NSW). Witnessing requirements apply to each signature.

The deed must be entered before final distribution

Once the executor has distributed the estate in accordance with the will, the assets are out of the executor’s hands, and the deed cannot reach them. The deed must be executed during the administration phase.

Stamp Duty Treatment Under Section 63 of the Duties Act 1997 (NSW)

A standard transfer of property from an executor to a beneficiary under the will attracts only $100 concessional transfer duty under section 63(1)(a)(i) of the Duties Act 1997 (NSW), increased from $50 on 1 February 2024. Revenue Ruling DUT 046 sets out the framework for how the concession applies, though it predates the 2024 fee increase and still refers to the $50 figure in some places

A Deed of Family Arrangement preserves part of that concession, but only to the extent the recipient takes property within their original will or intestacy entitlement. The treatment is:

• Within original entitlement: The $100 concessional duty applies to the transfer
• Above original entitlement: Ad valorem transfer duty is payable on the excess. The “excess” is the market value of property received above what the recipient would have received under the will or on intestacy

Revenue NSW assesses these arrangements through its Electronic Duties Returns process. Full evidence of the original entitlement, the deed itself, and the revised distribution must be lodged. Estates with significant real estate and substantial reallocation between beneficiaries can attract material additional duty.

Capital Gains Tax Treatment Under Section 128-20 of the ITAA 1997

The death of a taxpayer triggers a CGT rollover. An asset passes to a beneficiary at the deceased’s cost base under section 128-20 of the Income Tax Assessment Act 1997 (Cth). No CGT event happens on the passing itself.

A Deed of Family Arrangement preserves that rollover only if two conditions are met under section 128-20(1)(d):

1. The beneficiary entered into the deed to settle a claim to participate in the distribution of the estate
2. The only consideration given by the beneficiary was the variation or waiver of a claim to one or more other CGT assets that formed part of the estate

The ATO sets out its full position in Taxation Ruling TR 2006/14. Where the deed is signed for cash or external consideration rather than as an internal reallocation of the estate, the rollover is at risk, and CGT may be triggered. This is the most common tax trap with poorly drafted deeds.

Key Limitations of an NSW Deed of Family Arrangement

A deed is powerful but not unlimited. The limits matter:

• It does not bind eligible persons who are not parties to it. An eligible person under section 57 of the Succession Act 2006 (NSW) who has not signed the deed retains the right to bring a family provision claim within 12 months of the date of death
• It cannot reduce a minor’s or incapacitated person’s entitlement without Supreme Court approval. Any attempt to do so without that approval is unenforceable against the minor or incapacitated person
• It must reflect the original entitlements correctly. If the deed misstates what each beneficiary would have received under the will or intestacy, the stamp duty assessment can be challenged by Revenue NSW
• It cannot circumvent the rights of creditors of the estate. Estate creditors are paid before any distribution under either the will or the deed

How a Specialist NSW Probate Lawyer Helps With a Deed of Family Arrangement

A Deed of Family Arrangement is a tax instrument as much as a settlement document. Drafting one without understanding section 63 and section 128-20 routinely costs estates tens of thousands of dollars in avoidable duty or CGT.

Our team at Empower Probate Lawyers focuses exclusively on probate, estate administration, and will disputes. Our director, Oliver Morrisey, holds a Master of Laws in Wills and Estates (High Distinction) and has over a decade of experience handling probate and will disputes across NSW. We help executors and beneficiaries with:

• Drafting deeds that preserve the section 128-20 CGT rollover and the section 63 stamp duty concession
• Negotiating the substantive terms with all beneficiaries and any caveators
• Coordinating with accountants and Revenue NSW on the duty assessment
• Settling family provision and probate disputes by deed, both before proceedings and at mediation

Speak With a NSW Probate Lawyer About a Deed of Family Arrangement

If you are facing an estate dispute and want to know whether a Deed of Family Arrangement is the right solution, call Empower Probate Lawyers on 1300 481 161. Specialist advice. Free initial consultation. Deferred fee arrangements available in eligible cases.

Frequently Asked Questions

Can a Deed of Family Arrangement be used after probate has been granted in NSW?

Yes, provided the assets have not yet been distributed to the beneficiaries. The deed binds the executor to a revised distribution before the estate is finalised. Once distribution is complete, the assets are out of the executor’s hands, and the deed cannot reach them.

Does a Deed of Family Arrangement prevent future family provision claims?

It only prevents claims from people who sign the deed. An eligible person under section 57 of the Succession Act 2006 (NSW) who does not sign retains the right to bring a family provision claim within 12 months of the date of death. The deed should identify all known potential claimants and obtain their releases.

Do all beneficiaries need to agree to a Deed of Family Arrangement?

Yes. Every beneficiary under the will and every person entitled on intestacy whose share is affected must consent. A deed cannot vary one beneficiary’s entitlement without their agreement. If one party refuses, the deed cannot bind them, and the original entitlement stands.

Does a Deed of Family Arrangement need Supreme Court approval?

Generally, no, where all affected parties are adults with full legal capacity. Court approval is required where a beneficiary is a minor or lacks capacity. The Court approves the deed only if it is satisfied that the arrangement is in the interests of the person who cannot consent.

Is there a time limit on executing a Deed of Family Arrangement in NSW?

There is no statutory deadline, but the deed must be executed before the estate is fully distributed. For CGT and stamp duty purposes, executing the deed within two years of the date of death also aligns with the ATO’s main residence exemption window and reduces the risk of complications with the original CGT rollover.

What is the difference between a Deed of Family Arrangement and a settlement deed?

A Deed of Family Arrangement varies the distribution of the estate itself. A settlement deed in family provision proceedings records the terms of a court settlement and may include orders the Court will make. The two are often combined when settling a contested estate, with the settlement deed referencing the Deed of Family Arrangement that implements it.