Lengthy Family Estate Dispute Ends After Court Reviews Family Settlement Agreement

Family settlement agreements are arrangements made between heirs to distribute property differently than under a will. This allows beneficiaries, typically family members, to divide property as they see fit. Thus, in this way, family members do not always have to accept the provisions of a will if all of the beneficiaries sign off on settlement. In this case, the Iowa Court of Appeals was asked to interpret the provisions of a will and an accompanying family settlement agreement. 

Here, Mom executed a will in favor of her three living children. Two children were to receive all farm real estate owned by the mother and a third child was to receive bank stock equal to one-half of the value of the farm real estate. The third child was also granted the first right to purchase the balance of the remaining stock owned by the mother at the time of her death and the right to purchase or exchange property with the other two children for an undivided one-third interest in the farm property. All of the remaining property was to be divided between the grandchildren. The third child was designated as the executor of Mom’s estate. 

After the will was executed, Mom executed a codicil to the will which created a trust for the child receiving the bank stock. Two years later, a conservator was appointed by the court to handle Mom’s affairs. Mom’s bank stock was exchanged for shares of common stock in a bank group. In 1995, the children signed off on a Family Settlement Agreement setting the value of the stock in the estate and allowing the remaining child’s family to purchase additional stock from the estate. The settlement agreement also provided that in the event there was insufficient stock to fulfill the third child’s bequest, each of the beneficiaries was to receive an equal one-third share of the farm property. The intent behind the settlement agreement was to “serve as an aid” to the executor of the estate in valuing and distributing assets. 

Mom died in 1998, and her will and codicil were admitted to probate and the common stock was sold, totaling $993,756. The estate filed a timely estate tax return with IRS. Until 2002, the estate and IRS battled back and forth as to the taxes paid under the estate. Finally, in 2008, the executor’s final report was filed and it was recommended that all of the farmland be divided equally between the three siblings. One of the siblings objected, claiming that the distribution was inconsistent with the terms Mom’s will. 

At a trial court hearing on the matter, the court determined that Mom’s intent was to distribute her assets equally between her children. Thus, the division of the land was appropriate because the common stock earnings had been spent to pay the taxes and costs of the estate. The executor’s final report was approved as is. 

A daughter appealed, stating that the court improperly approved the final report and that the court erred in interpreting the language of the will to require equal distribution of the farmland. The court stated that the will should be examined as a whole and the testator’s intent should be examined when interpreting or giving meaning and effect to a particular area of the will. The plain language of the will stated that the farm land was to go strictly to two of the siblings and the third was to receive the bank stock. However, there was also a family settlement agreement in this case. Since all of the beneficiaries entered into an agreement for a different distribution and there was not sufficient remaining stock to fulfill the third child’s bequest, it was appropriate that each child receive a one-third share of the farm property. In re Estate of Amlie, No. 9-930/09-0449), 2010 Iowa App. LEXIS 115 (Iowa Ct. App., Feb. 10, 2010).