Walking on the Wild Side of Probate

family settlement agreementA Family Settlement Agreement (FSA) is the closest most Probate Lawyers will ever get to off-roading.

An FSA is an agreement among Will beneficiaries to, basically, disregard the terms of the Will. They can toss out the named executor, change the amounts they receive, and determine how the expenses will be paid from the estate. They can even deprive the probate court of jurisdiction.

Wow. Bet the decedent never saw that one coming.

All of this is possible because Texas law provides that when a person dies leaving a Will, that person’s estate immediately vests in the beneficiaries (subject to payment of the decedent’s debts). Because they now own the property, the beneficiaries are free to arrange among themselves for distribution of the estate.

Notwithstanding that there are hundreds of Texas statutes enumerating the law regarding decedent estates (there are 34 statutes in the Definition section of the Estates Code alone), no less than the Texas Supreme Court has proclaimed that a Family Settlement Agreement (a mere common law tactic) is the preferred alternative method of administration of an estate in Texas.

Talk about an invitation for creative writing.

To be valid, the FSA must be in writing, alter the decedent’s distribution plan, and establish a substitute plan.  It must be agreed to by the beneficiaries.

Who is left to complain? Why, the Executor named in the Will, of course. The Executor has been transformed from the most important person at the party (submits the Will to probate, controls all assets and payment of debts, has to work with a CPA to make the tax-filings, sometimes even gets paid) to an insignificant bystander. Unfortunately for the ego of Executors throughout the world, the courts have consistently held that a mere Executor does not have standing to complain about a valid FSA.

So if you happen to be in a situation where the beneficiaries have agreed about their disagreement with the Will, consider doing a Family Settlement Agreement. Give your probate lawyer a chance to walk on the wild side.