Family Settlement Agreements

Texas recognizes what are called “family settlement agreements.”  A family settlement agreement will be enforced by a court even if the distribution of the assets under the agreement differ from the distribution of the assets under the will.  A family settlement agreement is an alternative method of administration in Texas that is a favorite of the law.

Family settlement agreements in Texas may come about when the will does not treat the testator’s children equally but all of the children want to divide the estate equally.  This happens when a parent and a child are estranged at the time of the execution of the will.  The family may want most of the estate to go to a less fortunate sibling who is not doing as well financially as the others.  There may also be tax reasons to enter into a family settlement agreement.

Family settlement agreements may also be used to settle will contest and inheritance dispute cases.

To be enforceable, the family settlement agreement must:

1. be agreed to by all of the heirs and beneficiaries;
2. provide that a purported will shall not be probated; and,
3. provide for a plan of distribution of the estate to replace the one in the will.

When a will is not a will but is a community property survivorship agreement

three hands holding pens signing document on table

This question usually comes up when a husband and wife make their wills at the same time. A contractual will is different from a joint will. A joint will is just one document that has the testamentary wishes of two people. It is not contractual.

A contractual will can be established only by the provisions of the will itself, or the provisions of a binding and enforceable written agreement.  The mere fact that the testators signed a joint will, or that they frequently used the pronouns we, us and our does not establish the fact that the will was executed pursuant to an agreement to make a mutual will.

A mutual or contractual will is one executed pursuant to an agreement between the testators to dispose of all their property in a particular manner, each in consideration of the other.  Texas courts view claims of contractual wills cautiously.  Contractual wills can be established only by full and satisfactory proof, and no presumptions or inferences are indulged in favor of them.  To establish that a will is contractual, a two-prong test must be met.

1. First. the property at issue must not be conveyed to the survivor as an absolute and unconditional gift.
2. Second, the remainder of the estate of the first to die and the estate of the last to die are treated as a single estate following the death of the survivor, which is jointly disposed of by both testators in the secondary dispositive provisions of the will.

In a recent case, the husband and wife executed wills on the same day.  The will concluded by saying

“I have executed this Last Will and Testament concurrently with my said wife, (wife), having executed her Last Will and Testament, a copy of which is attached hereto and made a part hereof, both of said Last Wills and Testaments having been executed in accordance with a contract between us, and this is to acknowledge that both said wills are contractual and can not be revoked without the written consent of both myself and my wife.”

Husband died first.  He owned a house and land before this marriage so it was his separate property.  His will left the house to the wife using the following language: “It is my will and desire that my home …, shall pass to and vest in my wife, (wife), and I do hereby devise said real property to her.”  The will went on to say that if the wife died first, the house would go to his children by a prior marriage.

The testator’s children claimed that the will was contractual.  The wife claimed that the will was not contractual and that it gave her the house free and clear.  The court agreed with the wife.  It held that the gift of the house was unconditional.  The will was not contractual because it did not meet the requirements of being a contractual will as set out above.

The results of the above case or based on the presumption against contractual wills.  If you want a contractual will, it must be made exactly the correct way or the courts will apply the presumption that it is not contractual.

UPDATE: A Missouri appeals court decided that a contractual will did not survive a divorce. Missouri, like Texas, has a statute that nullifies all provisions in a will in favor of a spouse if the spouses divorce. In the Missouri case, the husband and wife had a contractual will. They divorced. The husband did not change his will. He died. The ex-wife filed the contractual will for probate saying that the contract between the deceased husband and her survived the divorce. The appeals court said it did not. Even though the parties contracted to make mutual wills, the wife would be treated as if she had predeceased the husband under the statute that nullifies provisions in favor of an ex-spouse.

In a 2018 Texas case, a husband and wife made a joint will. Later, the wife died. The husband then executed a new will. When husband died, the new will was offered for probate. Those that would benefit from the will of the husband and wife being contractual, contested the new will. The trial court ruled in their favor holding that the original joint will was contractual. On appeal, the appeals court said that the original will was not a contractual will. The appeals court said that the original will did not state that a contract existed nor are the material provisions of the contract set out in the will as required. The new will of the husband was admitted to probate as his will. 05-17-01072-CV