Drafting Agreements in Probate Cases

The beneficiaries and heirs of a probate estate are not stuck with the distributions set out in the decedent’s will or by Texas intestacy laws.

The beneficiaries and heirs can agree among themselves to some other distribution scheme.

This usually involves negotiating and recording the agreement in a family settlement agreement.

A carefully drafted settlement agreement can go a long way to avoiding probate litigation and disputes. The opposite is true for a poorly-worded agreement or an agreement that does not provide for a contingency or fact that later becomes important. The Carter v. Campbell, 427 S.W.3d 503 (Tex. App.–Austin 2014) case provides an example of this.

Facts & Procedural History

This case involves a mother and three daughters.  The mother had a will that distributed her estate to her three daughters in unequal shares. It also named one of the daughters as the independent executor.

The daughter with the smaller share was going to contest the will. Before she did so, three daughters entered into a family settlement agreement whereby each was to equal shares.

The probate court appointed the executor and then, several years later, the probate concluded with the filing of an inventory for the estate.

The daughter who was originally going to contest the will eventually filed a petition for an accounting and distribution.

The executor moved to dismiss as the probate court did not have jurisdiction given the family settlement agreement.  The probate court did not dismiss the contest, which resulted in this appellate court opinion.

The issue in the case was whether the terms of the family settlement agreement stripped the probate court of its ability to decide when distributions are to be made and whether the agreement trumps Texas law.

About Family Settlement Agreements

Heirs and beneficiaries can agree to a different distribution than what is stated in a will by entering into a family settlement agreement.

Family settlement agreements are favored in Texas. They can be used to settle probate estates without the need for expensive probate litigation.

These agreements are binding. They are enforced as any other legally binding contract.

As with other contracts, the terms that are used in the agreement matter. This brings us back to this court case.

The Omitted from the Agreement

The executor claimed that the family settlement agreement superseded the will and that the probate court did not have jurisdiction over the case.  The appellate court noted that the family settlement agreement in this case did not mention the probate court’s jurisdiction.  It did not say that the probate court had no jurisdiction. Thus, the appellate court found that there was no limit or constraint on the probate court’s jurisdiction due to the agreement.

The court case also considered the distributions set out in the family settlement agreement. The family settlement agreement provided for equal distributions, but it did not include any language for when distributions were to be made. Absent language to the contrary in the agreement, one has to consider the rules in the Texas Estates Code. Section 359.006 of the Texas Estates Code states that a person may file a written complaint in the court where the estate is pending once fifteen months have passed since the date of the original letters testamentary or the date the administration was granted.  The interested person can demand that estate funds be distributed at this time.

Given the absence of any language as to the timing, the appellate court concluded that the family settlement agreement did not limit the probate court’s ability to consider when distributions were to be made. The probate court could hear the issue under Section 359.006.

The Takeaway

This case shows that, when it comes to family settlement agreements, one has to evaluate what each party really wants and include language for this in the family settlement agreement. One also try to envision what disputes are likely to occur in the future.

An experienced probate attorney may have been able to foresee the lack of jurisdiction language and timing issues in drafting the agreement. This could have helped avoid the dispute in this probate case.