There are various ways for settling issues involving trusts and estates. One of the most popular
alternatives to litigation is a nonjudicial settlement agreement (NJSA). NJSAs are not always the best
line of action, but they can be a good alternative to litigation.
The ability to avoid the time, expense, and stress of litigation is one of the main advantages of NJSAs.
NJSAs can be finished very quickly, allowing the parties to go on with their lives, in contrast to litigation,
which can take months or even years to resolve.
Another advantage of NJSAs is that they are flexible. The parties can tailor the agreement to meet their
specific needs and concerns. This means that NJSAs can often result in more creative solutions than
would be possible in court. Additionally, NJSAs are private. Unlike court proceedings, which are generally
open to the public, NJSAs are confidential. This means that the parties can keep the details of their
settlement agreement private and avoid negative publicity.
While NJSAs have many benefits, they are not without their drawbacks. One of the main disadvantages
of NJSAs is that they are not binding on non-parties.The parties might believe they have resolved all of
their issues as a consequence, only to find themselves back in court later. Another potential downside of
NJSAs is that they may not be enforceable. This could be especially challenging if one of the parties has
already received their share of the trust assets and won't return them.
Finally, NJSAs can have some ugly consequences if they are not carefully crafted. One of the most
significant risks of NJSAs is that they can result in unintended tax consequences. For instance, the
distribution may be subject to additional taxes and penalties if the parties concur to transfer trust assets
in a manner that isn't consistent with the trust's provisions or the applicable tax rules.
Another potential problem with NJSAs is that they may not be comprehensive. The parties can end up
back in court later if they don't resolve all the problems that may need to be settled. This can be
especially problematic if the NJSA was intended to be a final resolution of all disputes.
There is a chance that NJSAs won't hold up in court if one party later decides to contest the agreement
since they aren't examined or approved by a judge. Furthermore, NJSAs might not be acceptable when
there is a considerable power disparity between the parties because that could allow one of them to put
excessive pressure or influence on the other.
Despite these limitations, NJSAs can be an effective tool for resolving disputes and distributing assets in
certain situations. For instance, NJSAs may be helpful when the parties already have a relationship and
want to keep it even in the face of a disagreement (for instance, when they are family members or
business partners).
Nonjudicial settlement agreements can be a valuable tool for resolving disputes over trusts and estates.
They offer several benefits, including flexibility, speed, and privacy. NJSAs can be non-binding,
unenforceable, and may result in unintended tax consequences or incomplete resolutions. Therefore, it is
essential to get legal counsel from a licensed expert before signing a NJSA to make sure your rights are
protected and the agreement is valid and enforceable.
Looking to resolve disputes over trusts and estates without the time, expense, and stress of litigation? Nonjudicial settlement agreements (NJSAs) offer several benefits, including flexibility, speed, and privacy. However, it's essential to understand the potential drawbacks, such as non-binding provisions, unenforceability, and unintended tax consequences. To ensure your rights are protected and the agreement is valid and enforceable, it's always a good idea to seek legal counsel from a licensed expert. Please contact the estate planning professionals at Anderson, Dorn & Rader.
