Defining a Family Settlement Agreement
A family settlement agreement is exactly what it sounds like – an agreement between family members, generally those who inherit property from mom or dad, which spells out how the family plans to divide up that property. Sibling A gets mom’s car and dad’s clock, and sibling B gets dad’s guns. And sibling C gets mom’s jewelry or cash – the details in the agreement can be very specific. The problem of dividing up property between family members isn’t limited to the assets which pass upon death. Dividing up property while someone is still alive is often just as divisive. This happens when , say, two brothers inherit money from mom and dad, agree to put it in a joint bank account, and then later want to take their half out of that account. Or, maybe one child takes care of mom all of her life but his siblings complain that he got the same inheritance as them. So the family settlement agreement allows family members to settle these types of issues with each other.
Family Settlement Agreement Basics
The components of a family settlement agreement can vary to some degree but usually cover the same fundamental aspects of the case. Those elements are as follows:
a) Identification of the Parties:
It has to clearly identify each person by name who is involved in the family settlement agreement. It also has to be clear on who is NOT included. The identity of the parties is extremely important.
b) Terms of Settlement:
This portion of the FSAs will always provide the actual terms of the settlement, such as in a divorce, what assets are being divided, what debts are being addressed and how they will be paid, and if any child support and alimony is being awarded and in what amount. This is the meat of the family settlement agreement.
c) Signatures:
This is arguably the most important part of the agreement as each party must sign it to indicate they are agreeing to the terms and conditions of the settlement. Once signed, there is no going back on the deal without a significant amount of time and money being put in to the effort. Thus, this aspect has to be taken very seriously.
When to Utilize a Family Settlement Agreement
Family Settlement Agreement Samples are not the end, but the mean to an end. A proper FSA and adequate consideration rendered by all heirs would release the estate of all claims, actions, suits and demands of any kind whatsoever. However, knowing when a family settlement agreement may be used, is the first hurdle which must be crossed.
A family settlement agreement is a contract – in writing or not – that settles a dispute between members of a family, typically, inheritance issues. Conversely, when there are inheritance disputes, the rule is that heirs may not use extrinsic evidence to prove heirs other than those named in the Will are entitled to inherit. Thus, we will address several scenarios where a family settlement agreement could and should be used.
When would a family settlement agreement be appropriate?
Probate issues in which heirs to a decedent’s estate disagree about the interpretation of the decedent’s last Will and Testament. When similar language is used in Wills with different results, an FSA may be appropriate. At times when the Will is clear but persons interested in the decedent’s estate are litigating protracted issues regarding the Will, an FSA may be appropriate. When heirs cannot agree on the correct calculation of the amount that one or more of the heirs are to receive under the Will. When Inherited property may not be certain and an FSA may be necessary to settle the amount. When real property is bequeathed to heirs who are not physically located in Texas. Once again, an FSA may be appropriate when it would provide certainty, save time and expense for all concerned.
Creating a Family Settlement Agreement
When drafting a family settlement agreement, you want to create a document that is precise, but simple enough that all parties to it can understand. When parties hire counsel to draft a family settlement agreement, it sometimes helps them feel more secure about the deal they are receiving, as well as receive guidance that they are not shorting themselves on certain things or leaving ambiguities that will lead to litigation in the future.
When parties get together to discuss a family settlement agreement they may already have an outline of the things they want to address. It is a good idea to take out your last listing of issues that were unresolved.
If you have already discussed the issues you will be dealing with, modify that list so that it reflects the new agreement. Try to create paragraphs for the new issues, and modify the paragraph numbers accordingly.
You should also explain what each new paragraph addresses. The reader should be able to quickly figure out what is left to be decided through both the numbered list at the beginning and through the legalese in the paragraphs.
There are some basic things that should be in any settlement agreement. That is the information in Section 308 of the Divorce Code, such as the date of the marriage, the date of filing, the number of minor children, etc. It is also a good idea to have the parties affirm that they have complied with discovery and that they have made full financial disclosure.
You should make sure that the parties explain the property division that they are going to do. It is a good idea to state who will be keeping the home, and a brief description of the value. If there are vehicles, you should list the vehicles by make, model, year, and whether there is an outstanding loan.
Real estate is an issue that can sometimes be complicated if there is a co-mortgager, or if there are multiple owners of real estate. You will want to make sure that the parties agree on what the value of the real estate is, and how the sale is going to occur. If one person gets the real estate and there is a mortgage, you should indicate who will be responsible for refinancing the mortgage.
You should also include the parties agreement that they do not intend or are not required to transfer any retirement benefits, pension, or debt. However, in the case of pension issues, the IRS has some very specific requirements, and so that requires a more thorough review to break down the law.
If there are children, you should talk about the custody provision, including whether there will be a full custody, shared custody, or primary residential plan. If there is only joint legal custody, you should state that there will be a parenting coordinator, but make sure that you follow the statute to find out what the responsibilities are for the parenting coordinator.
You should also include the child support terms. You need to include the state child support guidelines, so you may want to attach the child support guidelines as Exhibit A.
At the end of your agreement, you want to make sure you have an enforcement clause. Often times people will have an arbitration clause included that allows them to settle any disputes, or an early resolution case manager clause. That clause prevents lower courts, other than family court, from getting involved in disputes about the settlement agreement.
Legal Acceptance of a Family Settlement Agreement
For a family settlement agreement to be legally enforceable, it must meet certain requirements. It should be in writing and signed by all parties. In addition to being admissible as evidence in the court system, as discussed below, many states require these documents to be recorded with local agencies. Furthermore, your agreement will not be valid unless and until the court issues an order incorporating it by reference. If you make changes to the terms of the document, courts will generally want them in writing. Verbal agreements will not be given much weight by the judge, in the absence of a formal writing, particularly if a dispute arises down the road.
To be valid, there must be a showing of independent legal advice, particularly if the agreement implies or expressly states that you are waiving some of your rights. Legal advice does not have to be obtained prior to signing: formal legal advice can be obtained "after the fact", if necessary . The court will do its own analysis of the facts and circumstances, but if you meet the requirements to be deemed independent legal counsel at the time of signing, the judge will be more likely to uphold the agreement. The agreement does not have to be fair and equitable. As long as it is showing an arms-length transaction whereby you and your family have made the decision in good faith to resolve an inner-family dispute, the court is generally not going to care if the deal seems lopsided or unfair.
If any of the parties do not live in the same jurisdiction, the agreement can be submitted to the court to issue a judgment. This will be issued where you are "domiciled" or "reside" under the law in the local courts or in another state to be enforced against the parties residing there. All in all, this will be similar to seeking an endorsement of a settlement in the state court where the formal divorce action has been filed. If the agreement is the subject of a dispute, it will usually need to be filed in the court itself (seeking a formal endorsement of it) to require the parties to enforce it.
A Sample Family Settlement Agreement
A Sample Family Settlement Agreement should include at least the following common sections:
Caption
State of Missouri
County Of St. Louis
Probate Division
In the Estate of:
Wendy D. Wisconsin,
Deceased
Case No. __________
Division: 29
FAMILY SETTLEMENT AGREEMENT
THIS FAMILY SETTLEMENT AGREEMENT (hereinafter referred to as this "Agreement") is made and entered into as of this ___ day of ______________, 20__, by and between the two (2) natural children of Wendy D. Wisconsin and two (2) natural grandchildren of Wendy D. Wisconsin who are also heirs at law of her aunt, Joanna Davis. This agreement is made and entered into by and among Brian D. Washington and Carla D. Peters, both natural born children of Wendy D. Wisconsin and both hereinafter referred to as "Washington Parties", Jennifer Peters and Elizabeth Peters, both natural born children of Carla D. Peters and Brian D. Peters, both hereinafter referred to as "Peters Parties", all this Meghan F. Davis, co-personal representative of the Estate of Wendy D. Wisconsin, Deceased and hereinafter referred to as "Davis". The Washington Parties, the Peters Parties, and Davis may sometimes hereinafter be referred to collectively as the "Parties" or individually as "Party".
INTRODUCTION
This Family Settlement Agreement is contingent upon and subject to the approval of the Probating Court of Saint Louis County, Missouri. It is the joint intention of the Parties to the Agreement, as set forth herein, to provide a list of each item disposed of by the Washington Parties and any and all monetary payments to be made by the Washington Parties as a result of the sale of personal property and real estate of the decedent, Wendy D. Wisconsin. It is the express intention that payments due to the Peters Parties as a result of this Family Settlement Agreement shall be paid to Bryan Kram, attorney of record for the Peters Parties within thirty (30) days after the first filing of the original of this Family Settlement Agreement in the Probate Court of Saint Louis County, Missouri.
RECITALS
By virtue of the laws of intestacy the Washington Parties are entitled to thirty (30) per cent (30%) of the net distributable assets of the Estate, with the remaining seventy (70) per cent (70%) being distributable to the Peters Parties. The Court’s probate of the Will of Carolyn M. Wisconsin has been closed and the Court’s orders entered directing the Davis to sell the real estate by public auction. The Washington Parties wish to purchase the real estate at auction and each of the Washington Parties, and Davis, desires to dispose of each and every item of personal property of the Estate of the decedent, the late Wendy D. Wisconsin. NOW, THEREFORE, in consideration of the mutual covenants, obligations and payments agreed to and to be performed by the parties hereto, it is hereby agreed by and between the parties hereto, as follows: TBD
Refrain from These Family Settlement Agreement Errors
When it comes to family settlement agreement samples, most people will make the same mistakes over and over again. When drafting these documents, a person must be very precise. If there is any type of ambiguity in the language of the document, then it can be open to misinterpretation later on. Guidance from a legal professional is important with these types of documents.
The first mistake that people will make with estate planning documents like the family settlement agreement sample that we have provided is to think this is a simple document that they can create on their own terms. Estate law can be very complicated, and you will not know this until you are already in over your head.
One mistake is with the information contained within the family settlement agreement sample. People will often leave out important information. You do not want to have to create an addendum to the original document because that just complicates the situation.
Another common mistake is with the way in which properties are divided up. You want to be very clear about what is intended to be done with each piece of property. When you read this document four years after it was created and are trying to interpret what the meaning is, you want to have all of the language there .
There are many pieces of information that can help the legal professional to better help you. The more information that you can provide them with about the situation, the easier they can help you with drawing up the document.
These common mistakes are why you need to go with a good family settlement agreement sample. There are lots of these samples available on the Internet if you know where to look. You should always provide as much information about the family as possible.
With the family settlement agreement sample, you will already have the easiest parts drafted for you. You don’t want to take shortcuts in this area when the rest of the estate plan will be very complicated. It will only serve to frustrate you if you have to deal with errors and omission later on in the process.
When you go with the family settlement agreement, you are posting a bond for the beneficiaries and your investment. This will keep you from having to go to court if someone has a problem with the distribution. You have the information you need to settle these disputes on your own.
You must be willing to be very particular throughout the entire process of estate planning. A lot of times, people will just try to throw these things together. That leads to documents that do not have any long-term power. You need to make the best decision for your family.