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Part Ten: Limiting Liability Exposure and Creating a Family Settlement Agreement

David M. Frees, III
Attorney, Speaker and Author

Kurt Kunsch:     That brings us to number 10. 

 

Dave Frees:      The final one is that executors get to the end of estate administration, they just give the money out.  They fail to conclude the estate in one of the two appropriate ways.  One way is to go through the court accounting process, and to say to the judge, here is everything that we did and here is how much is left and here is how much is going to everybody, and the judge ok’s it.  Now I’m not recommending that and very, very rarely do we ever have to do that, I mean just the tiniest percentage of cases where that’s ever necessary and usually that’s because there’s some kind of a dispute.  Where the family’s all in agreement, we want to skip that whole piece of the probate process  so we will often do the second one which is I will prepare a family settlement agreement, where everybody in the family is going to say I got the records of the estate administration, I know how much the lawyer was paid, I know how much the accountant was paid, I know how much the funeral expenses were, I know how much the executor took in commission if anything, I know how much money they made on the investments, I know how much money they sold the house for, I know how much is left after the payment of expenses for me and I agree with that, and I take that and I will not hold the executor liable for any mistakes that may have been made because I don’t think there were any made. 

 

There’s a whole process of documenting all of this among family members so that if later a debt does crop up, everybody agrees to give the money back, but most importantly, the executor has managed their liability exposure.  And that is an area again, that  an accounting firm can’t prepare  for you and a bank can’t prepare that for you.  That is something that you will need legal counsel to prepare for you.  That is commonly called a receipt release and indemnification or family settlement agreement, and from the executor’s standpoint, very, very powerful tool in protecting them from ongoing liability exposure, and a very powerful tool from the whole family’s standpoint, as a way of staying out of court and saving thousands of dollars of attorney’s time.

 

It’s absolutely true that if you go through this full probate process with the accounting, that that is going to slow down the estate administration, and it is going to result in bigger legal fees, and nobody that gets along, families that get along don’t want or need that.  So you should consider having a family settlement agreement, and that is a major mistake that people make, they just get to the end and hand out the money, and they leave themselves open to people coming back, in fact, using that money to hire lawyers to come back and sue them for things they thought they did wrong during the estate administration. 
David M. Frees III Esq.

610-933-8069

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