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Family Settlement Doctrine in Texas

Case law on the family settlement doctrine supports the conclusion that the family settlement doctrine is applicable generally when there is a disagreement on the distribution of an estate and the beneficiaries enter into an agreement to resolve the controversy.

The family settlement doctrine involves three basic principles:

(1) The decedent's right to make a testamentary disposition:

A decedent has the statutory right to dispose of his or her property on death in a manner he or she sees fit. TEX. PROB. CODE ANN. § 57 (Vernon 2003). The courts must protect this right as a matter of public policy: "Neither courts, juries, relatives nor friends of a testator may say how property should be passed by a will or rewrite a will because they do not like the distribution of the property." In re Estate of Morris, 577 S.W.2d 755 (Tex. App.--Amarillo 1979, writ ref'd n.r.e.)

(2) The beneficiaries' right to convey their rights:

The second principle underlying the family settlement doctrine recognizes that, on the death of the testator, title of the property in the estate vests in the beneficiaries. Under Section 37 of the Texas Probate Code, when a person dies leaving a will, all of the estate devised or bequeathed by the will immediately vests in the devisees or legatees, subject to payment of the decedent's debts. Shepherd v. Ledford, 962 S.W.2d 28, 32, 41 Tex. Sup. Ct. J. 333 (Tex. 1998). The beneficiaries of an estate are free to arrange among themselves for the distribution of the estate and for the payment of expenses from that estate. See TEX. PROB. CODE ANN. § 37 (Vernon 2003); Shepherd, 962 S.W.2d at 32. That being so, the beneficiaries have the right to convey the property after distribution of the estate. Morris, 577 S.W.2d at 755. Pointing out that it makes little sense to limit the right of conveyance before receipt in the regular course of administration of the estate and adding that agreements among the family can end controversies through compromise, the Morris court expressed that family settlement agreements are favored by the law. Id.

(3) balancing those competing rights by requiring an agreement to an alternative distribution plan:

To balance the first two principles, the courts impose certain requirements on a family settlement agreement. A valid family settlement agreement must contain both an agreement not to probate a will and an agreed plan of distribution to replace the plan set forth in the will. Id. at 756. Put another way, if the beneficiaries' settlement does not dispose of all the estate's property, then it cannot replace the will and perform the function of transferring title to the decedent's estate. See id.