Deed of Family Arrangement in Malaysia
Beneficiaries of a deceased estate may sometimes wish to agree on a practical arrangement concerning how estate assets are to be held, distributed or dealt with. A Deed of Family Arrangement may be used in appropriate circumstances to formally record the agreed arrangement, subject to the Will, applicable succession law, estate administration requirements and other legal considerations.
What Is a Deed of Family Arrangement?
A Deed of Family Arrangement is a written agreement used in appropriate estate situations to document an arrangement agreed among relevant beneficiaries or family members.
The arrangement may concern how particular estate assets are to be enjoyed, retained, transferred or otherwise dealt with as part of the administration or subsequent arrangement among beneficiaries.
The purpose of the document is to clearly record what has been agreed and the respective rights and obligations of the parties, rather than leaving the understanding as an informal family arrangement.
A Simple Example
A deceased leaves several beneficiaries who are entitled to interests in an estate.
Instead of immediately dealing with every asset strictly according to the original proportions, the beneficiaries may wish to agree upon another practical arrangement.
Whether that arrangement can properly be implemented, and how it should be documented, depends on the estate and the legal rights involved.
When Might a Family Arrangement Be Considered?
Families may consider an agreed estate arrangement for a number of practical reasons. Whether a Deed is appropriate depends on the particular estate.
One Beneficiary Takes a Particular Asset
Family members may wish for one beneficiary to receive a particular property while other beneficiaries receive different estate assets or benefits.
Property Is to Remain Intact
Beneficiaries may prefer that a family property or other asset not be immediately sold or divided.
Family Members Reach a Consensus
Relevant beneficiaries may agree upon a practical method of dealing with the estate instead of leaving their understanding undocumented.
Long-Term Family Arrangement
Family members may wish to structure the enjoyment or management of particular estate assets over a period of time.
Can Beneficiaries Simply Change a Will?
A valid Will represents the testamentary intention of the deceased and ordinarily governs the administration and distribution of the estate according to its terms.
Therefore, a Will should not simply be displaced by relying upon a Deed of Family Arrangement that operates contrary to the testator's wishes without the necessary legal basis or Court approval.
Accordingly, where an estate is governed by a Will, the Will itself should first be reviewed before any family arrangement is drafted or implemented.
What If There Is No Will? Or If the Will is Invalid?
Where the deceased died intestate, entitlement to the estate is generally determined under the applicable succession law and estate administration process.
In an appropriate estate, beneficiaries may nevertheless reach a consensual arrangement concerning distribution, provided the applicable legal and procedural requirements are satisfied.
In the small-estate process, for example, JKPTG expressly recognises consensual distribution where all entitled heirs fully agree to the proposed distribution.
Examples of Possible Family Arrangements
The following are examples only. They do not mean that the proposed arrangement will automatically be legally appropriate for every estate.
Family Home to One Beneficiary
Several beneficiaries have interests in an estate but agree that the family home should ultimately be retained by one beneficiary, with the overall estate arrangement addressed accordingly.
Parent Continues to Enjoy Estate Income
Adult children may wish, where legally appropriate, to structure an arrangement allowing a surviving parent to continue enjoying income or benefits from particular assets.
Different Assets to Different Beneficiaries
Instead of several beneficiaries becoming co-owners of every estate asset, the family may wish to allocate different assets among them under an agreed arrangement.
How We Approach a Proposed Family Arrangement
Before preparing the Deed, the existing legal rights and administration status of the estate should first be established.
Review the Will or Intestacy Position
We identify how the estate would otherwise be administered and who has an interest in the relevant assets.
Review the Grant or Estate Order
We consider whether a Grant of Probate, Letters of Administration, Distribution Order or other estate authority has already been obtained.
Identify the Beneficiaries and Their Rights
The parties affected by the proposed arrangement and their existing legal or beneficial interests are identified.
Understand the Proposed Arrangement
We take instructions on what the family intends to achieve and which estate assets are affected.
Consider Legal and Tax Implications
The proposed arrangement may have implications beyond probate law, including trust, property, stamp duty, taxation or registration considerations depending on how it is structured.
Prepare the Appropriate Documentation
Where a Deed of Family Arrangement is appropriate, the agreed terms can then be formally documented together with any related estate or conveyancing documentation that may be required.
What If the Arrangement Involves Property?
Many family arrangements arise because the estate contains a house, condominium, land or other property which the beneficiaries do not wish to own jointly.
A Deed of Family Arrangement by itself does not necessarily complete the land registration process.
Depending on the estate, the executor or administrator may first need to complete the appropriate transmission or other estate registration process before a subsequent transfer or dealing can be registered.
The title status, existing charge, restrictions in interest, relevant consents and intended recipient should therefore be reviewed together with the estate arrangement.
Estate + Conveyancing
TEH & YU handles both probate and estate administration and conveyancing matters.
Where the arrangement involves Malaysian property, we can therefore consider both the estate documentation and the subsequent property registration steps.
Matters That Should Be Considered
A family arrangement should be evaluated as part of the overall estate, rather than treated as a standalone document.
The Will
Where there is a valid Will, the testamentary wishes and powers granted to the executor must be considered.
All Affected Beneficiaries
The rights of every person affected by the proposed arrangement must be properly identified.
Minor or Incapacitated Beneficiaries
Additional considerations arise where a person whose rights may be affected cannot simply give informed legal consent.
Tax & Property Consequences
The intended arrangement may carry tax, trust, stamp duty or conveyancing consequences depending on its structure.
Documents We May Need to Review
- Will of the deceased, where applicable
- Grant of Probate or Letters of Administration
- Distribution Order or other estate order, where applicable
- Details of beneficiaries and family members
- List of estate assets
- Property titles and property documents
- Existing trust or estate documentation
- Details of the proposed family arrangement
Already Agreed Among the Family?
Even where everyone appears to agree, it is preferable to review the estate documents before simply preparing a Deed.
The agreement should be checked against the Will or intestacy position, the powers of the executor or administrator, the existing grant or order and any legal rights that may be affected.
We can then advise whether a Deed of Family Arrangement is appropriate or whether another form of documentation or Court process should instead be considered.
Related Estate Services
Frequently Asked Questions
What is a Deed of Family Arrangement?
A Deed of Family Arrangement is a formal document that may be used in appropriate circumstances to record an agreed arrangement among relevant family members or beneficiaries concerning estate assets or benefits.
Can beneficiaries change the distribution stated in a Will?
A valid Will should not simply be disregarded. Any proposed family arrangement must be considered against the terms of the Will, the testator's intention, the executor's duties and any applicable legal or Court requirements.
Do all beneficiaries need to agree?
Whether unanimous consent is required depends on the nature of the arrangement and the legal rights being affected. Where an arrangement proposes to alter or affect the beneficial interests of several persons, all relevant rights and consents should be considered before implementation.
Can one beneficiary give up his or her share to another beneficiary?
This may be possible in an appropriate case, but the legal effect depends on how the entitlement arises and how the proposed arrangement is structured. Tax, stamp duty, property and estate administration implications may also need to be considered.
Can siblings agree that one sibling keeps the family house?
A consensual arrangement may potentially be structured in an appropriate estate, but the Will or intestacy position, estate administration status, beneficiaries' respective interests and property transfer requirements should first be reviewed.
Does signing a Deed automatically transfer the property?
No. A Deed of Family Arrangement does not necessarily complete the land registration or conveyancing process. Separate transmission, transfer, consent, stamping and registration procedures may still be required.
Can a Deed of Family Arrangement create a trust?
Depending on its terms, an estate arrangement may have trust consequences. The intended structure should therefore be considered carefully.
Can TEH & YU also handle the property transfer?
Yes. Our practice covers probate and estate administration as well as conveyancing. Where the family arrangement involves estate property, we can consider the related property registration and conveyancing work where appropriate.
Has Your Family Agreed on How to Deal With an Estate?
Send us brief details of the deceased, the Will or estate order, the beneficiaries involved and the arrangement the family wishes to make. We can review whether a Deed of Family Arrangement or another legal mechanism is appropriate.