Jane Moore executed a will in 1995, leaving all her property to her husband, Morris, and naming him as independent executor. When she died, this will was offered for probate and Morris named executor. Six months later, Jane’s daughter, Margaret discovered her mother had executed another will in 1998, which left ten thousand dollars to Morris and the rest of her estate to Margaret and Henry, children of a previous marriage. This 1998 will revoked all prior wills and named Margaret as executrix. Henry, who strongly identified with his stepfather, preferred the 1995 will and attempted to persuade Margaret to tear up the 1998 will. Margaret would not agree. Can this family settle this dispute without having to go through an expensive and time-consuming will contest?
Family Settlement Agreements Can Substitute for a Will
Fortunately, Jane Moore’s family can resort to what is known in legal circles as the Family Settlement Doctrine. They may enter into an agreement not to probate either will and instead divide the assets of the estate in an alternate manner. All beneficiaries under the will(s) must be parties to the agreement. The Family Settlement Doctrine is applicable when there is a disagreement as to how the property in the estate ought to be distributed. The beneficiaries simply enter into an agreement to resolve the controversy. In this case, Morris, Margaret and Henry would have to all agree not to probate either of Jane’s wills and then agree as to how to divide her property.
Ultimately, Henry decided on a course of distribution that did not leave anyone out. The Moores solved their dispute by dividing Jane’s estate into thirds: one-third to Morris, one-third to Margaret and one-third to Henry.
Family Settlement Agreements Must Contain Elements to Create a Contract
The Family Settlement Agreement is a contract, so it must contain all the elements required by law to be valid. These elements include: (1) an offer; (2) an acceptance, (3) consideration; (4) all parties over 18 years of age or represented by a guardian; and (5) the ability of the parties to obtain possession of the decedent’s property.
“Consideration,” as it relates to contracts, means something of value that one party to the contract promises to the other. In this case, the consideration of each of the parties would be what each of them would be giving up if the property in the estate was to be distributed according to either will.
The Family Settlement Doctrine is based upon the idea that the property of the decedent belongs to the beneficiaries under the will. Since the beneficiaries could transfer that property in any manner they wish immediately after the property is distributed to them in probate, no legitimate reason exists to prevent their doing so before they would have received it in the course of the estate administration.
Courts favor Family Settlement Agreements because they can settle disputes without the expense and stress of protracted litigation. A number of circumstances present an opportunity to consider the Family Settlement Agreement in lieu of probating the will. A parent might be estranged from one child and leave that child out of the will. In another case, the parent disapproves of a child’s lifestyle and leaves nothing to that child. Another example is a will which leaves a life estate to the spouse but the spouse does not have ample funds to maintain the house.
Family Settlement Agreements Must Provide An Alternate Distribution Scheme
A Family Settlement Agreement is, in part, an agreement, joined by all the beneficiaries and heirs, not to probate the will. The will, of course, provides for a particular distribution scheme for the decedent’s property. If the will is not probated, to be valid, the Family Settlement Agreement must include a distribution scheme that takes the place of the distribution scheme the decedent devised in his or her will.
The case of In the Estate of Halbert, 172 S.W.3d 194 (Tex. App. - Texarkana 2005) illustrates how one family suffered from not including an alternate scheme of distribution in the Family Settlement Agreement to be substituted for the scheme of distribution in the will.
In Halbert, the decedent had actually written three different wills. The surviving spouse and three children could not agree on which to probate. The family submitted their dispute for mediation in hopes of resolving these differences. At mediation, the parties entered into an agreement they titled “Partial Mediated Settlement Agreement.” After this agreement was signed, one of the daughters tried to enforce it and the surviving husband sought to have it declared unenforceable. When the case was appealed, the appellate court found the agreement was not enforceable because it lacked the required alternate distribution scheme.
Although the mediation was less expensive than a full-blown trial in a will contest would have been, it still involved attorney’s fees, fees to pay the mediator and the attendant expenses involved. The Halbert family had to pay for all those fees and expenses which, in many ways, was wasted because they still had to renegotiate an enforceable agreement. When the decedent’s estate was ultimately divided, its value was considerably less than it had been on the date of the decedent’s death.
Family Settlement Doctrine Can Be Applied With Threat of Will Contest
The Family Settlement Doctrine does not stipulate that a will contest have already commenced. The doctrine can be applied when there is even a “threat” that a will contest may be brought by a beneficiary. Understanding this, most families should make every effort to resolve their disputes through a Family Settlement Agreement before a will contest is ever filed.
Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm, whose principal office is in Fort Worth, Texas. She lives and practices in Somervell County. If you have questions or concerns, please contact her by email at firstname.lastname@example.org or by phone at 254.797.0211.