Introduction

When a person passes away, the distribution of his/her assets will follow his/her Will. If he/she does not have a Will, then the default position under the law governed by the Intestate Succession Act (ISA) would have to be applied.

But what happens if the distribution seems unfair e.g. one member of the family has been left out? Or the beneficiaries of the estate do not want to inherit the assets due to personal reasons. What can be done to help these people?

Under the law, there is a legal document called the Deed of Family Arrangement which can be prepared to re-distribute the deceased’s estate in a new manner so long as all the beneficiaries of the estate are agreeable to the new manner of distribution.

An Example of Deed of Family Arrangement in the High Court Case of [1994] 2 SLR 750

In this case, the deceased father passed away without a Will leaving behind his wife and his 13 children. 7 of the children were from the first marriage while 6 of the children were from the present marriage.

Under the ISA, the deceased’s wife was entitled to 50% of the estate while the deceased’s 13 children were entitled to the other 50% of the estate in equal shares.

However, before the deceased’s estate was administered completely, the deceased’s wife passed away and she had made a Will under which she gave all her estate to her 6 children.

As a result, this had a significant impact on the share that the 2 sets of siblings would inherit. After the deceased’s wife death, the deceased’s wife 6 children would receive about 3 times more than the deceased’s 7 children from the first marriage and this caused unhappiness within the family as the distribution is now unequal.

In order to avoid dispute, the 13 children came together to discuss upon which they had all decided to sign the Deed of Family Arrangement to distribute the deceased’s and the deceased’s wife estate in a different way. They have all decided and agreed that the deceased’s wife estate would be paid $510,000.00 in settlement of her share in the deceased’s estate and the balance of the deceased’s estate would be divided equally among each of the children. The Deed of Family Arrangement also provided that all 13 children would pay their inheritance into one of the family-owned companies resulting in each of the 13 children having an equal shareholding of the company.

Requirements of Deed of Family Arrangement

In order for the Deed of Family Arrangement to be valid and binding, the following requirements under the law have to be complied:

(a) The Deed of Family Arrangement is required to be evidenced in writing and to be executed formally as a deed.

(b) All the beneficiaries of the estate of the deceased must give their consent to re-distribute the assets in accordance with the terms and conditions of the deed.

(c) All the beneficiaries have to be at least 21 years old in order to give their consent.

Stamp Duty Implications

If the assets involved in the Deed of Family Arrangement are real properties or shares, parties would need to pay stamp duty to the Inland Revenue Authority of Singapore (IRAS).

For example, in a typical family situation, the deceased husband owns a condominium in his sole name. He then passed away without a Will leaving behind his wife and 2 children. Under the ISA, the wife will inherit 50% of the condominium and the children will inherit 50% of the condominium in equal shares. Say in this case, the wife does not want her 50% share of the condominium and wishes to give her share to the 2 children, the Deed of Family Arrangement can be prepared to this effect.

As the distribution is not in accordance with the ISA, stamp duty is payable on the transfer of the wife’s 50% share to the 2 children based on the current market value of the property. The following documents and information would have to be submitted to IRAS for IRAS to determine the stamp duty payable:

(a) copy of the executed Deed of Family Arrangement;

(b) copy of either the Will or Letters of Administration or Inheritance Certificate issued by the Syariah court;

(c) copy of Schedule of Assets in the estate;

(d) manner of distribution of assets amongst the beneficiaries;

(e) value of each asset (properties and shares) belonging to the estate. If parties are not sure on the value, parties can request for IRAS (at a fee) to conduct the valuation of the assets.

Conclusion

As could be seen above, the Deed of Family Arrangement gives the beneficiaries the flexibility to re-distribute the estate of the deceased in a new manner with all the beneficiaries’ consent. It is after all a very useful legal document to avoid litigation and meant to be for the benefit of the family.

Haryadi Hadi
Advocate & Solicitor