Good Life

Money Matters | Family settlement wraps up estate

Q: My uncle died, and the executor is supposed to make a distribution of cash to me. I received a receipt and release form from the executor, and it asks me to sign it before I get my money. Does this make sense?

A: Yes. It makes sense from the executor’s point of view, which is that the executor is trying to make a distribution of assets under the terms of the will to you. The executor is making the distribution without a court order, and thus wants you to acknowledge the fact you are receiving the distribution and you are releasing the executor from any liability on that particular distribution.

The receipt and release form usually has a refunding agreement in it, too. The refunding agreement states that if there is an error made by the executor in the amount or type of distribution, you will give the asset back to the estate so the executor may correct the error and make proper distributions to all of the parties.

Q: The executor of my uncle’s estate said that if I do not sign a receipt and release form and return it, she will go to court and have the court make an order of distribution, and it will take longer for me to get my money.

A: Yes, it will take much more time for you to get your money, because a petition will have to be filed by the executrix with the court asking for a distribution to be made to you, and possibly other people in the estate, and that all takes time. The executrix is doing you a favor by telling you that she is willing to make an early distribution of assets from the estate, but you have to sign the receipt and release form. If you don’t sign the receipt and release form, her only option to make such a distribution is to ask the court’s permission to do so, so as to protect her from any claims by any of the beneficiaries.

There is no harm in signing a receipt and release form and not going through the court process, unless you suspect something is wrong in the accounting or operation of the estate. If you feel the estate is not being handled properly by the executor or the attorney, then you should not sign the receipt and release form, and you should demand that a full accounting be done before any distribution to any beneficiary.

If the executrix asks the court for an order of distribution, you may object and require the executrix to disclose more information about the estate so that the court is satisfied that the estate is being administered properly.

Q: The executrix of my uncle’s estate also said she would like to wrap up the estate with everyone by having the family sign a family settlement agreement. How does that work and what does it mean?

A: The administration of an estate must come to an end at some point. The two usual methods are by a family settlement agreement or by a first and final account and schedule of proposed distribution. During the administration of an estate, distributions are often made to beneficiaries before the end of the administration of the estate, and the receipt and release method is used to catalog and certify that distributions have been made.

When an estate ends, the object is to give the beneficiaries a final accounting of all of the financial transactions that have taken place in the estate, and to distribute whatever assets are remaining in the estate to the beneficiaries. The family settlement agreement is an informal, but legal, method of accounting to the beneficiaries concerning all of the financial transactions that have taken place in the estate. It is also a statement of how much each person will receive from the estate either through the receipt and release method or at the termination of the estate. The family settlement agreement also states the beneficiaries of the estate agree to release the executrix from any future liability, assuming the executrix has not committed fraud.

The first and final account and schedule of proposed distribution method is more formal than the family settlement agreement. The executrix files a final accounting with the court and asks that the court make an order allowing distribution of the assets from the estate to those persons as named in the will. If the court makes such an order, the estate is terminated and becomes final.

The executrix then uses the court’s order as a basis for making distributions to the beneficiaries, and does not have to receive any type of approval from the beneficiaries, because the court has made an order as to how the distribution is to be made.