While it is a skill rarely taught in law school, the art of settling a dispute, particularly a complex or hotly contested dispute, is one of the most important parts of a successful lawyer's practice. In the trusts and estate world, one creative way to resolve a dispute is to have the paying party contractually agree to pay the settlement amount from his or her estate.
Such a provision has the benefit of addressing short-term liquidity issues, situations where the paying party currently lacks sufficient assets but is expected to earn and/or receive significant sums in the future, and can induce the paying party to settle for a larger amount than would otherwise be achievable today. However, such benefits come with significant potential traps for the unwary. This article identifies the most common traps (e.g., negotiating for an illusory percentage of a decedent's estate, and failing to put in place safeguards that reasonably limit the paying party's ability to deplete their assets prior to death through gifting and other means), and provides useful practical tips to maximize the effectiveness of such provisions.
