Deeds of Variation, Deeds of Family Arrangement – Can someone change the terms of your will after you die?

“Standard” Will contrasted with a “Discretionary Testamentary Trust” Will

A will is a legal document which records what you want to happen to your possessions and assets after you die. You appoint an executor, who carries out your wishes. You and also include other wishes, for example, what you want for your funeral and who you would like to look after any children under the age of 18. There are two broad categories of wills:

• standard wills; and
• wills including discretionary testamentary trusts.

Both kinds set out the wishes of the will-maker, the difference is how much flexibility they give to the beneficiaries and potential benefits that a trust gives that a ‘standard’ will does not have.

Discretionary testamentary trusts allow for a greater flexibility in how your estate can be managed: they give enhanced asset protection for your beneficiaries and allow your beneficiaries to obtain favourable tax treatment in the right circumstances.

The use of discretionary testamentary trusts allows for the splitting of income and capital gains generated among the potential beneficiaries of the trust that is created.

They also allow the trustee to make distributions to future generations that may not even exist at the time of the will’s creation, for example grandchildren, even great-grandchildren.

So, if you have gone through the process of having your will drafted, what happens after you die? Are the terms of the will fixed from that point? Not necessarily. In addition to the commonly talked about “family provision claims” where people seek more from an estate, there are also ways to agree to a change or variation:

What is a deed of variation?

A deed is a legal document which records an interest or right between two or more people.

A deed of variation specifically is used to change the details of an existing agreement. A deed of variation usually includes a restatement or summary of the original terms of agreement and acknowledges that the purpose of the further document is to vary those terms in the new agreement.

From time to time during the administration of an estate, a deed of variation (or sometimes referred to as a deed of family arrangement) is used to vary or alter the terms of a will after the will-maker has passed.

Some examples of circumstances where a deed of variation might be used include to:

• correct an obvious error in the will that it is agreed can be rectified;
• agree to certain terms and avoid a Court case when a family expects there to be a legal dispute over the will; or
• Vary the distribution of the estate from what the will maker set out in the will.

Case note example: Re O’Hara-Tucker

Re O’Hara-Tucker [2022] VSC 572 is a case that was heard by Justice McMillan of the Supreme Court of Victoria to determine whether to approve a deed of variation changing a distribution of an estate.

Patricia O’Hara-Tucker (Patsy O’Hara, a “pioneering woman and popular member of the Victorian Bar”) died leaving a will that gave her estate to her siblings – Maeve, Vivien and Eva. Vivien lives in the United Kingdom, suffers from dementia with a poor life expectancy. Her share of the estate was about $3,150,000 under the terms of the will. Viven had appointed powers of attorney in the UK, as she was not able to manage her own affairs.

Vivene’s family sought that her inheritance be split into 8 newly created separate trusts that would pass to her eight adult children, but during her lifetime have the intent to support Vivene’s expenses and meet her needs. This, in turn, would avoid inheritance tax, which the applicants estimated to be in excess of £450,000, levied in the United Kingdom.

One of her children, Siobhan, applied to VCAT to be permitted to manage her mother’s estate (ie. the inheritance) in Victoria, which was granted, including a power to act in what might otherwise be a “conflict transaction”. On that basis Siobhan entered into the deed with the executors of Patsy’s estate.

The Court held, dismissing the application:

• An executor has power to compromise or compounding a claim that would otherwise affect the estate they are administering.
• However, an executor has no power to give a beneficiary’s entitlement under a will to someone else (at [55] and [59]). Moreover, the Court cannot approve or authorise a transaction that the executors have no power to enter in the first place (at [59]).
• Therefore, the applicant instead sought to say that the effect of the deed was to “assign” (that is, pass the legal interest to someone or something else) Viven’s interest under the will to the trusts.
• It is possible for the beneficiary of an estate to disclaim (‘give up’) or assign their inheritance (at [66]), and the Court also agreed that, properly authorised by VCAT, a person’s administrator could also give effect to that intention (at [88] – [91].

The difficulty in this case was that unless the Court approved the deed Siobhan signed, it was not effective, and the Court could not approve this deed (as the executor’s did not have the power to enter it) and VCAT did not give Siobhan enough power to assign Viven’s interest as the parties intended, to avoid the inheritance tax issue.

What to do then?

Though it might be possible for your beneficiaries to change your will – including to change it to account for circumstances that you did not foresee – it is essential that all the parties get specialist advice about the potentially very complex questions of who has the power to achieve that end.

Butlers Business Lawyers and Chamberlains Law Firm have merged!

Joining forces with the Chamberlains Team has expanded our capabilities beyond what we thought possible. This means introducing a new cast of talented legal practitioners along with a massive expansion in expertise areas such as Building & Construction, Insurance Law, Private Wealth Law and more. This alliance will ensure that new and existing clients will experience a higher calibre of legal support in a variety of areas with the help of some new faces. Learn more about Chamberlains Law Firm here.