Jason Freeman (Jason Freeman LLP): Releases and Family Settlement Agreements in Trust & Estate Litigation (December 15, 2021)

Jason Freeman, of (Jason Freeman LLP), has made available for download his article, “Releases and Family Settlement Agreements in Trust & Estate Litigation,” published in JDSUPRA. The abstract is as follows:

A settlement agreement can be beneficial to all parties – it may help reduce litigation costs, facilitate dispute resolution, or guide the parties to a common understanding. However, settlement agreements do not come without risk. Settlement agreements should be entered into with care and with an understanding of the terms—and their implications. Austin Trust Co. v. Houren presents a good example of these considerations.  In Austin Trust, an agreement contained language in a release that barred the parties from bringing future claims.  The case serves as a cautionary tale to parties who wish to settle. 

Background

Following the death of their father, the beneficiaries of an estate realized that their distributions would be delayed until a federal estate tax return had been filed. Seeking to speed up the distribution process, the beneficiaries entered into a family settlement agreement (“FSA”) with all interested parties. The FSA was negotiated by the parties, who acknowledged that they were either represented by counsel, or consciously chose not to be represented by counsel.

The FSA contained a release that, among other things, released all claims for breach of fiduciary duty. The exact language in the agreement releases read as follows: “any and all liability arising from any and all Claims,” including “claims of any form of sole contributory, concurrent, gross, or other negligence, undue influence, duress, breach of fiduciary duty, or other misconduct” and defined “covered activities” to include “(1) the formation, operation, management, or administration of the Estate,…or the Trusts, (2) the distribution of any property or asset of or by…the Estate,…or the Trusts, (3) any actions taken (or not taken) in reliance upon this Agreement or the facts listed in Article I,” (4) “any Claims related to, based upon, or made evident in the Disclosures,” and (5) “any Claims related to, based upon, or made evident in the facts set forth in Article I.”

The FSA was signed on June 10, 2015. In early 2016, the executor of the estate filed the federal estate tax return, which did not list an alleged $37 million debt as either an asset or a liability. Austin Trust sent a demand letter seeking repayment of the alleged debt, which the executor rejected. Austin Trust claimed a breach of fiduciary duty, and the executor asserted that this duty had been released. The trial court agreed, and an appeal followed.

Click here to view Jason Freeman’s summary of “Releases and Family Settlement Agreements in Trust & Estate Litigation.”

Posted by Bennett Mansour, Associate Editor, Wealth Strategies Journal.

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