When someone passes away in Texas, most people assume the will controls everything. If the will says “A gets the house” and “B gets the bank account,” then that’s the end of the story.

Surprisingly, that is not always true.

Under Texas law, families can sometimes legally change how an estate is divided—even if the will says otherwise. This is done through a powerful but little-known tool called a Family Settlement Agreement.

In many probate cases, this doctrine quietly resolves disputes without ever going to trial.

Let’s unpack how it works.

What Is a Family Settlement Agreement?

A Family Settlement Agreement (FSA) is a written agreement among heirs and beneficiaries to resolve disputes and distribute an estate in a way different from the will or intestacy laws.

Texas courts strongly favor these agreements.

As the Texas Supreme Court has explained, family settlements are encouraged because they:

“Promote peace and harmony and avoid litigation.”

In practical terms, this means:

If all interested parties agree, they can often override the will.

The Legal Basis: Texas Estates Code § 154.001

Texas law expressly authorizes settlement of estate disputes.

Texas Estates Code § 154.001(a) provides:

“A personal representative of an estate may compromise or settle in the best interests of the estate any claim or controversy…”

This statute allows disputes involving:

• Wills
• Property ownership
• Creditor claims
• Beneficiary rights
• Executor conduct

to be resolved by agreement instead of litigation.

Courts routinely approve family settlements when they are fair and properly executed.

When Are Family Settlement Agreements Used?

FSAs commonly appear in situations like:

1. Questionable or Poorly Drafted Wills

If a will is vague, outdated, or contradictory, beneficiaries may agree on a cleaner division rather than litigate.

2. Blended Families

Second marriages often create tension between:

• Surviving spouses
• Children from prior relationships

A settlement can balance competing interests.

3. Unequal Distributions

When one heir receives “too much,” others may negotiate adjustments.

4. Threatened Will Contests

If someone is prepared to challenge the will for:

• Undue influence
• Lack of capacity
• Improper execution

A settlement may avoid years of litigation.

5. Executor Disputes

Families may restructure administration when the named executor is unpopular or ineffective.

Who Must Sign the Agreement?

To be enforceable, all interested persons must generally agree.

This usually includes:

• All beneficiaries
• All heirs at law
• The executor or administrator
• Guardians (if minors are involved)
• Sometimes trustees

If even one necessary party refuses, the agreement may fail.

Can You Cut Someone Out Through a Settlement?

Sometimes—yes.

If all parties consent, a beneficiary can agree to:

• Take less
• Take nothing
• Trade property
• Accept cash instead of assets

However, this must be voluntary and informed.

Courts will scrutinize agreements that appear coercive.

Court Approval Is Often Required

Many FSAs must be approved by the probate court, especially when:

• Minors are involved
• Incapacitated persons are involved
• The estate is still under administration

Under Texas Estates Code § 154.002, court approval protects vulnerable parties and ensures fairness.

Without approval, enforcement may be risky.

How Family Settlements Interact with Probate

Once approved, the agreement effectively becomes the controlling document.

The executor then distributes property according to:

The settlement—not the will.

In practice, this means:

• Deeds may reflect new ownership
• Bank accounts may be retitled
• Probate inventories may change
• Court orders may be modified

A properly drafted FSA becomes legally binding.

Common Mistakes with Family Settlement Agreements

❌ Handshake Deals

Verbal agreements are dangerous and often unenforceable.

❌ Missing Parties

Leaving out one heir can invalidate the deal.

❌ Poor Drafting

Ambiguous language leads to future lawsuits.

❌ Ignoring Tax Consequences

Reallocating assets may trigger:

• Capital gains
• Gift tax
• Estate tax issues

❌ No Court Approval When Required

This can undo months of negotiation.

Why Texas Law Favors Family Settlements

Texas probate courts prefer settlement because it:

• Reduces court congestion
• Saves estates money
• Preserves family relationships
• Avoids unpredictable jury trials

Litigation can drain estates through attorneys’ fees. Settlements preserve value.

Are Family Settlement Agreements Always a Good Idea?

Not necessarily.

They can be dangerous when:

• One party is being pressured
• Financial information is hidden
• Power imbalances exist
• Fraud is suspected

In those cases, formal litigation may be safer.

Practical Example

Suppose:

• Dad leaves everything to Son A
• Son B believes Dad was manipulated
• Son B prepares to contest the will

Instead of litigating:

A and B agree:

• A keeps the house
• B receives $150,000
• Estate pays legal fees

They sign an FSA. The court approves it. Probate ends.

No trial. No appeal. No five-year fight.

When You Should Talk to a Probate Attorney

You should seek legal guidance if:

• A settlement is proposed
• You feel pressured to sign
• You’re unsure of asset values
• Minors are involved
• You suspect misconduct

Once signed, FSAs are very difficult to undo.

Final Thoughts

Family Settlement Agreements are one of Texas probate law’s most powerful—and most overlooked—tools.

They allow families to:

✔ Rewrite distributions
✔ Avoid litigation
✔ Preserve assets
✔ Resolve disputes privately

But when done incorrectly, they can create permanent legal and financial harm.

If you are dealing with a disputed estate in Texas, understanding this doctrine may save you years of stress and thousands of dollars.

At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.