Wednesday, July 24, 2019
Article on You Settled it, Right? Family Settlement Agreements in Probate, Trust, and Guardianship Disputes
J. Ellen Bennett, Mark R. Caldwell, & Donovan Campbell, Jr. recently Article entitled, You Settled it, Right? Family Settlement Agreements in Probate, Trust, and Guardianship Disputes, 11 Tex. Tech Est. Plan. Com. Prop. LJ, 213-254 (2019). Provided below is an introduction to the Article.
In practice, very few cases proceed to trial. Statistically, most disputes are settled (usually through mediation). Probate, trust, and guardianship disputes are no exception. These cases are frequently resolved by utilizing what is known as the family settlement doctrine and entering a family settlement agreement (FSA). Despite the frequency with which these cases settle, drafting effective probate, trust, or guardianship FSAs can be more complicated than anticipated. For a variety of reasons, these FSAs can be both substantively and procedurally tricky. This article highlights some of the common procedural issues the practitioner may frequently encounter in the three key phases of entering a probate, trust, or guardianship FSA: (1) formation; (2) exchanging consideration; and (3) enforcement.
The complexity of probate, trust, and guardianship settlements is driven by a variety of factors. First, it can be challenging to identify all of the necessary parties who must sign a probate, guardianship, or trust settlement as compared to those who should, but are not required, to sign it. This analysis is usually at the forefront of the minds of the parties, who want to finally resolve their dispute and eliminate the possibility for someone to later challenge it or claim that the settlement is not binding on them. Even after all of the necessary parties are identified, however, settling parties who are serving as fiduciaries must be mindful to fulfill their disclosure duties to the appropriate persons before entering a settlement. Additionally, in a typical probate, trust, or guardianship dispute, there are frequently parties, such as administrators, guardians, or attorneys ad litem, who require court authority to enter a settlement or to fulfill its terms. Thus, unlike other areas of the law, a probate, trust, or guardianship settlement may--even after all the parties have signed it--be subject to additional conditions precedent before the parties are actually required to perform their contractual obligations in earnest. Additionally, depending on the terms of the FSA, any later court order may be limited to merely approving the FSA, or the court may adopt and incorporate the FSA into the order, thereby making it the judgment of the court. These different acts significantly impact the parties' options to enforce the FSA.
These unique dynamics present complexities that many settling parties (and their counsel) do not anticipate when drafting the FSA. As with most contracts, the devil can be in the details. Careful attention should be given to expressly stating what happens if things do not go as planned (e.g., when a necessary party ends up not signing the FSA or the parties fail to secure court approval of the FSA) and knowing the applicable law in default.