The process of probate administration can be lengthy, complicated, and costly.
Fortunately, Texas law provides various alternatives to a full probate administration. These alternatives include a small estate affidavit, an affidavit of heirship, and a family settlement agreement.
While each of these options has its own unique set of requirements and limitations, a family settlement agreement can be a particularly useful tool when certain circumstances are met.
In the right circumstances, a family settlement agreement can be the most flexible and easiest to implement option. However, it’s important to understand the requirements and potential consequences of using a family settlement agreement.
Family settlement agreements are used to resolve probate disputes without trial. They can help avoid litigation costs and uncertainty associated with trial.
Family settlement agreements can be used to resolve a number of probate disputes, such as will contests, will construction suits, claims and trust modifications, etc.
A family settlement agreement is also useful in situations where there are multiple wills or where a will contest is contemplated by an heir. They can also be used to divide probate property as the heirs and other interested parties desire.
A family settlement agreement is a preferred alternative method of administration of an estate in Texas.
Section 154.002 of the Texas Civil Practice and Remedies Code defines the Texas public policy on family settlement agreements:
It is the policy of this state to encourage the peaceable resolution of disputes, with special consideration given to disputes involving the parent/child relationship, including mediation of issues involving conservatorship, possession and support of children, and the early settlement of pending litigation through voluntary settlement procedures.
The Texas courts have affirmed this preference for settlement agreements.
Family settlement in Texas have to address three basic criteria:
Texas law provides several requirements that must be met to establish a family settlement agreement in Texas. These requirements include that:
If these requirements are met, all beneficiaries by signing the agreement are then estopped from challenging the agreement later on, and the agreement is enforceable as any other written contract.
It should also be noted that any claims of fraud or other challenges to the agreement by the parties have to be made within four years are they are barred.
The tax implications of family settlement agreements are particularly important.
Distributions that are different than those called for in the will and/or intestacy laws can trigger taxable gain.
Also, the terms of the agreement should include language to take advantage of exchange treatment, to lock in capital or ordinary gain or loss treatment were desired, and to maximize allowable deductions and credits.
Depending on how it is drafted, the family settlement agreement can also have significant estate and gift tax consequences.
In the case of a will, a question arises as to how persons can agree to a distribution of an estate that runs contrary to a decedent’s intentions.
It is possible because under the Texas Estates Code, when a person dies leaving a will, all of the estate devised or bequeathed by the will immediately vests in the distributees, subject to payment of the decedent’s debts. This allows heirs to enter into family settlement agreements given that they are able to transfer property as they see fit immediately after the decedent’s death.
The family settlement agreement is a shortcut that allows the parties to avoid having to accept property and then trade property among themselves.
In Texas, a family settlement agreement can be used in lieu of a probate administration under certain circumstances. Some common situations where a family settlement agreement can be used include:
If you are facing the prospect of probate administration in Texas, it’s important to know that there are alternatives available that can save you time, money, and reduce the likelihood of family disputes. While a small estate affidavit, an affidavit of heirship, and a family settlement agreement are all options, a family settlement agreement can be particularly useful when certain circumstances are met. With the right approach, you can settle the estate efficiently and effectively, while preserving family relationships and minimizing legal costs.
If you need help with your Texas probate matter, call us today for a FREE attorney consultation at (281) 219-9090 .
Our Houston Probate Attorneys provide a full range of probate services to our clients, including helping with disputes between heirs. Affordable rates, fixed fees, and payment plans are available. We provide step-by-step instructions, guidance, checklists, and more for completing the probate process. We have years of combined experience we can use to support and guide you with probate and estate matters. Call us today for a FREE attorney consultation.
The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney . We encourage you to seek the advice of a competent attorney with any legal questions you may have.