As the name implies, a “family settlement agreement (FSA)” is an agreement among the members of a family concerning the distribution of a loved one’s estate. “Family” may include step-parents, half-siblings, and other types of relatives, and, in some situations, a non-family member may even be a signatory to such an agreement. Just as an ordinary settlement agreement serves to contractually put an end to a dispute or potential dispute between parties, a family settlement agreement can help people who might otherwise find themselves at odds in probate court reach an amicable, out-of-court resolution of the issues between them. This can save money, time, and embarrassment at having to “air the dirty laundry” of a family’s private business in a public forum. Nashville estate planning attorney Randy Ratliff and his staff will be glad to explain the family settlement agreement process to you if you have questions about a particular situation.
While everyone has the right to direct the distribution of their personal property and real estate upon death, not every estate plan is created equally. Sometimes, a mistake is made, and it is helpful to enter a family settlement agreement to correct that mistake – the alternative being to fight things out in probate court or possibly face unfavorable tax consequences or other difficulties. For example, suppose that an elderly man owns two vehicles: a sport utility vehicle and a sports car. He leaves the SUV to his daughter and the sports car to his son, but, after he dies, the two discuss the matter and realize that the son (who has a family) really needs the SUV, while the daughter (who is hoping to buy a house) would like to sell the sports car to help with the down payment. Assuming that the siblings are the only heirs (or that the other heirs also agree), a family settlement agreement can “fix” the situation. Granted, the brother and sister could have simply traded cars after the estate was probated, but this could have triggered some unfavorable and unnecessary tax consequences.
Family settlement agreements can also allow an administrator to serve without a bond, correct a property description that was mistyped in a will, add a disinherited relative back into a will, or sell off all of a decedent’s property and divide the proceeds in a certain way. Settlement agreements can be particularly helpful in complicated family situations, such as second marriages in which both parties had children from a previous marriage, and the surviving spouse would prefer to do something other than inherit in accordance with the will or elect against the will in accordance with the law. Family settlement agreements allow much more creative solutions to trusts and estates issues than might otherwise be possible.
At this point, you might be wondering, “This sounds good, but surely there is a catch?” Unfortunately, there is a catch, and it is not to be taken lightly. Every heir must agree to the terms of the settlement. It is not a “majority rule” situation, so even a relatively minor stakeholder in the will can keep a settlement from going through. This is true even if everyone else agrees that the sensible thing to do is to use a family settlement agreement to effectuate a more beneficial result than the testator’s will would yield.
At the Randy Ratliff Law Offices, PLLC, we can help your family decide if a family settlement agreement might be appropriate in your particular situation. Nashville attorney Randy Ratliff regularly assists people in Brentwood, Franklin, Cool Springs, and other areas of Davidson and Williamson Counties with their estate planning, probate, family, and elder care needs. Call us at 615-656-8282 or contact us online to schedule an appointment to discuss your situation in the privacy of our office. We also handle family law matters, trusts (both drafting these documents and administering them), and Medicaid planning issues.