Settling Trust Dispute

When you settle a civil dispute, you are in fact contracting with each other. I will give you money if you drop your lawsuit. It is enforceable in court as a contract. However, trust claims are different because technically only a trustee can decide how to distribute assets, and the trustee must abide by the terms of the trust. So, if the trust says one thing, and all of the beneficiaries tell the trustee to do something else, the trustee must abide by the trust language.

So what does that mean for settlement of trust cases? Well, you need court approval for all settlement agreements because all agreements will likely necessitate you either modifying the trust pursuant to Probate Code section 15403 (as discussed previously) or the court is directing the trustee to act contrary to the terms of the trust, pursuant to Probate Code section 17200.

If you do not get court approval, then the settlement is not enforceable. Keep in mind, petitions for approval of settlement agreements are generally a formality, however, there are many times when a court—especially when there is a vulnerable beneficiary—will not approve the settlement agreement for one reason or another. If that occurs, you have to go back to the drawing board with the opposing side to figure out the best way to address the court’s concerns (and there will always be a way to address the concerns because the court doesn’t want the case on its calendar).