When someone passes away, their estate typically goes through a legal process called probate. During this process, the deceased person’s assets are distributed to their heirs and any outstanding debts are settled.
However, disputes can arise between heirs regarding who should serve as the personal representative, how the estate is handled, and the distribution of assets, which can lead to lengthy litigation.
One tool that can be used to resolve disputes among heirs is a family settlement agreement. While these agreements are generally binding, there may be circumstances in which a party wants to get out of the agreement.
The case of Estate of Riefler, No. 07-16-00375-CV (Tex. App.–Amarillo 2017) highlights some of the legal issues that can arise with FSAs in Texas probate cases, including the importance of understanding the requirements for a valid agreement and the authority of guardians or other representatives who enter into such agreements on behalf of others.
Facts and Procedural History
Mr. Reifler’s wife died and then Mr. Reifler died. At the time of his death, he had no children of his own.
His pre-deceased wife had one child, who Mr. Reifler had raised from an early age but had not formally adopted.
Mr. Reifler’s surviving sister died after Mr. Reifler before the probate process was completed. This sister’s husband was appointed as her guardian to represent her before her death and then for all matters related to her estate, including Mr. Reifler’s probate proceeding.
Mrs. Reifler’s daughter initiated the probate process, claiming to be the only heir using the doctrine of adoption by estoppel. The daughter filed her application for heirship and application to be appointed as the executor.
Mr. Reifler’s sister’s husband also sought to be the executor and contested the daughter’s claim to be an heir.
The parties entered into a settlement agreement whereby the daughter was recognized as the adopted daughter and $920K of estate assets would pass to her (to her children, as she died prior to the close of the probate) and $440K would pass to Mr. Reifler’s sister (to the sister’s husband, as the sister died prior to the close of the probate).
It appears that the sister’s husband may not have fully understood what amounts were being paid to the adopted daughter vs. the amounts his wife’s estate would receive. The sister’s husband wanted to get out of the settlement agreement and litigation ensued.
What is a Family Settlement Agreement
A family settlement agreement (“FSA”) is a legal document used in Texas probate cases to resolve disputes among the heirs of a deceased person’s estate. The FSA is a contract between the parties, which outlines how the assets and property of the estate will be distributed among them.
The FSA is typically used when there is a disagreement among the heirs over the distribution of the assets, or when there is a question about the validity of the deceased person’s will.
The agreement can be reached either before or after the filing of a probate case.
To be valid in Texas, a family settlement agreement must meet certain requirements, including:
- It must be in writing and signed by all of the parties involved, including any adult heirs, the executor or administrator of the estate, and any guardians or attorneys ad litem appointed for minor or incapacitated heirs.
- It must clearly identify all of the property and assets of the estate that are subject to the agreement.
- It must state that the parties intend to settle any disputes or claims that exist among them.
You’ll notice that there is no requirement listed above that the FSA be filed with the court and approved by the judge overseeing the probate case.
Settlement Agreement Not Approved by the Court
The appeals court was asked to determine the validity of the settlement agreement. The primary issue was whether the Dallas Probate Court had to agree to the settlement. Mr. Reifler raised this issue.
The $440K payment to Mr. Reifler’s sister had to be submitted to the Dallas Probate Court for review, according to the terms of the settlement agreement. Mr. Reifler’s sister, via her husband-guardian, indicated that he would not submit it to the Dallas Probate Court for review even though this would have been up to him to do. Mr. Reifler’s sister argued that the settlement agreement was void absent this judicial review.
The appeals court concluded that the husband-guardian had waived his right to raise this argument given that it was his obligation to submit the agreement to the Dallas Probate Court for review.
Void vs. Voidable
“Void” and “voidable” are two legal terms used to describe the status of a contract or agreement.
A contract that is “void” is considered to be null and void from the beginning, as if it never existed. It is not legally binding and has no legal effect. For example, a contract that is entered into illegally, such as a contract to commit a crime, is void.
On the other hand, a contract that is “voidable” is one that is initially valid, but may be voided or canceled by one of the parties involved due to some defect or deficiency in the formation of the contract. This means that the contract is still legally binding unless and until it is voided by one of the parties. For example, a contract entered into by a minor is voidable because the minor may disaffirm the contract upon reaching the age of majority.
Mr. Reifler’s sister’s husband raised this argument as to why the settlement agreement was invalid.
The court concluded that the settlement agreement was voidable as Mr. Reifler’s sister, via her husband-guardian, but he did not take this position at the trial court level.
So he waived this argument for the purposes of this litigation.
The appeals court also concluded that the settlement agreement was valid because the husband-guardian, as guardian, apparently had the authority to act on behalf of his wife.
With respect to this second argument, the court noted that it might have reached a different conclusion if the guardianship order had been provided and it showed that Mr. Reifler’s sister’s husband could only enter into agreements that were in the sister’s best interest and that the husband concluded that this agreement was not in the sisters best interest. This would essentially mean that the husband exceeded his authority and, as a result, the settlement agreement was void. These facts were not in the record in the case, however.
This case highlights the importance of understanding the requirements for a valid family settlement agreement in Texas probate cases. While settlement agreements are generally binding, a party may be able to get out of an agreement if there is a defect or deficiency in its formation. Additionally, it is important to consider the authority of guardians or other representatives who enter into such agreements on behalf of others. It is recommended to seek the guidance of a probate attorney when navigating the probate process in Texas.
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