Washington’s Trust and Estate Dispute Resolution Act (abbreviated TEDRA) allows settlements of disputes in trust and probate cases with a minimum of court involvements. In a recent case, the Washington Court of Appeals applied the basic policy of the law to uphold a modification of a settlement despite the fact that procedures in the settlement were not strictly followed.
In 2008, a son sued to have his father placed in a guardianship, claiming the father suffered from dementia. In March 2009, the father and son settled their dispute, with the father agreeing to write a will and create a living trust for the son’s benefit. The settlement agreement stated that modification of the will or trust required court approval after a motion was filed with the court and served on the son. The will and trust, in turn, left the father’s estate to the son or his descendants, naming several other relatives as contingent beneficiaries should the son die without descendants.
In August 2009, the father, after disputes with one of the contingent beneficiaries, wanted to modify the will and trust to name a second set of primary contingent beneficiaries and significantly reduce the interest of the first set of contingent beneficiaries. The son agreed, and they prepared an agreement that stated that it met the March 2009’s agreement’s requirement to get a court order, and authorized the changes. The same day, the father amended his will and the trust. Several months later, the father then filed a memorandum with the court summarizing the August agreement.
The son died before the father, leaving no descendants. As a result, the two groups of contingent beneficiaries fought over whether the August 2009 amendments were valid.
The first question was whether the will and trust themselves required court approval before modification as a result of a statement in each that they were subject to the March 2009 agreement. The court decided that “subject to” does not automatically impose the requirements of the March 2009 agreement, but only meant that the terms of the will and trust were conditioned on the agreement. That left open the March 2009 agreement to be modified by the father and son when they signed the August 2009 agreement. (Yes, this does sound like nit-picking, but it was brought to the court’s attention, and they had to decide.)
The next question was whether the limitation on modification of the will or trust under the March 2009 agreement limited amendment of the agreement itself. The law generally understands that a limit on the power to modify an agreement can itself be modified or waived. As might be expected, a limitation on this ability to modify will be read narrowly. TEDRA also was intended to allow modifications of settlements without repeated requests for court approval, as often was required before TEDRA was enacted. In the absence of a specific restriction on changing the March 2009 agreement, the court decided that there was nothing to prohibit an agreement to amend the March 2009 agreement.
After that, the court had to decide whether the August 2009 agreement did, in fact, amend or sufficiently comply with the March 2009 agreement. TEDRA, by its terms, allows agreements to be filed with the court and states that those agreements would have the force of a court order. The August 2009 agreement stated that it satisfied the requirement of the March 2009 agreement to get a court order for modification. In an earlier case, the Washington Supreme Court had ruled that strict compliance was not required to satisfy a TEDRA agreement. Instead, close conformity to the agreement was enough. In this case, the court ruled that reaching an agreement with the son and filing a memorandum of the agreement with the court effectively substituted for filing a motion, serving it on the son, and then getting the court to rule on the motion. For all intents and purposes, the father and son re-settled the case. There was no reason to require a court to review changes that the father and son had agreed to.
This ruling underscores the policy of TEDRA to encourage settlements. In fact, it encourages settlement of disputes that might come up in performing an earlier settlement. This corresponds to the policy of the law in most other fields of law. If you want your case to settle, feel free to talk to your lawyer about trying to get the other side to agree, and how to simplify any disputes that might occur in performing the settlement.