Financial Intel Monthly

Family Settlements: Estate Planning

Jul 31, 2020 9:41:00 AM / by The Retirement Group (800) 900-5867

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What Is A Family Settlement?

Legally Binding Agreement

A family settlement is a legally binding agreement (or contract) made among your heirs and/or beneficiaries regarding the distribution of your estate.

Since they are legal documents, family settlement agreements are subject to several restrictions. For example, they are generally not enforceable against a party if that party does not have the legal capacity to contract. If the family settlement affects the rights of minors or incompetent persons, a legal guardian generally must be appointed to represent the interests of such persons. It may be necessary to appoint a guardian to represent the interests of unborn or unascertained beneficiaries as well. In addition, these agreements bind only the contractual parties (e.g., the parties whose signatures appear on the settlement agreement). An heir or beneficiary who does not enter into the agreement may challenge any subsequent distribution unless the settlement is made for his or her express benefit. Finally, family settlements are usually subject to the Statute of Frauds. This means that the agreement must be in writing, or it will not be enforceable.

Example(s): You die leaving all of your property to your three children in equal shares under your will. Your property includes income-producing property. Your children are in different income tax brackets. Your children present your will to probate along with a written settlement agreement that redistributes the property in unequal shares in order to take advantage of the lower income tax bracket of one of your children.

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Caution: Settlement agreements (as with all contracts) are governed by state law. Rules relating to family settlements vary from state to state. Be sure to check whether such settlements are valid and how they should be executed in your state.

Resolution of Will Disputes

A family settlement is one way of resolving a dispute over the provisions of your will. The probate court has the power to reject the settlement, but the court probably will accept it if all parties have agreed to the settlement and there is no evidence of coercion. Courts usually give great deference to family members' attempts to resolve disputes among themselves.

May Help Avoid Probate

A family settlement can actually be used to avoid probate (the court-supervised process of administering your estate). In this case, the family distributes property pursuant to the agreement without probating the estate.

Caution: Using a family settlement to avoid probate is probably not advisable, or even possible, when real estate is involved. In addition, when minor or incompetent beneficiaries are involved, family settlement may not be available.

 

 

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

 

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

 

The Retirement Group is a Registered Investment Advisor not affiliated with FSC Securities and may be reached at www.theretirementgroup.com.



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