If everyone with a stake in a trust agrees on how to fix it, why should they have to pay for a court hearing to say so? In Nevada, they often do not. A nonjudicial settlement agreement, sometimes shortened to NJSA, lets a trustee and the affected beneficiaries resolve a wide range of trust problems by signing a written agreement, with no judge involved.
For a family dealing with a trust after a death, that can mean months saved and thousands of dollars kept in the estate instead of spent on litigation. It can also go badly if the agreement is signed by the wrong people, or asks for something the law does not allow. This guide explains how these agreements work in Nevada and where the traps are.
What Is a Nonjudicial Settlement Agreement?
A nonjudicial settlement agreement is a written contract among the people whose interests are affected by a trust, resolving a question about how the trust is administered or what it means. Nevada authorizes these agreements in NRS 164.940 and 164.942, which took effect in 2015.
The key rule is that an agreement signed by all of the indispensable parties is enforceable without approval by a court. That gives the agreement much of the same practical force as a court order, without the filing fees, hearings, and delay.
What a Nevada Settlement Agreement Can Resolve
The statute lists a number of matters that an agreement can cover, and the list is expressly not exhaustive. Examples include:
- Interpreting or construing a term of the trust
- Adding, deleting, or modifying a term or condition
- Approving a trustee’s report or accounting
- Appointing or replacing a trustee, and setting the trustee’s compensation
- Granting a trustee a power the trust does not currently give
- Merging or dividing trusts
- Moving the trust’s principal place of administration, or choosing the law that governs it
- Directing a trustee to act or to refrain from acting
- Releasing a trustee from liability for a particular action
- Terminating the trust
Because the list is open-ended, agreements can be used creatively. A family that wants to split a trust into separate shares to keep siblings out of each other’s business can do so. So can a family that wants to replace a trustee everyone has lost confidence in, or clear up a confusing distribution clause without a lawsuit.
Who Has to Sign
An agreement is effective when it has been signed by all of the indispensable parties. In general terms, that means the trustee and every beneficiary whose interest could be materially affected by the decision. Missing even one person can leave the agreement open to challenge.
The hard cases are beneficiaries who cannot sign for themselves: children, unborn or unascertained beneficiaries, and people who lack capacity. Nevada allows some of these people to be represented by another person under NRS 164.038, and a party represented that way is treated as having signed when the representative signs. Getting representation right is one of the most technical parts of the process.
What if someone simply will not sign, or cannot be found? The statute provides a mechanism for a trustee to send a notice of proposed action to indispensable parties who have neither signed nor objected, following the procedure in NRS 164.725. The trustee can also petition the court to approve the agreement, which is the safer route when the stakes are high or the parties are not all cooperating.
The Limits of a Settlement Agreement
These agreements are powerful, but Nevada draws firm lines.
No violating a material purpose of the trust. A settlement agreement is void to the extent it violates a material purpose of the trust. If the settlor set up a spendthrift trust to protect a beneficiary from creditors, the family cannot agree to hand that beneficiary a lump sum.
No terms a court could not approve. The agreement is also void to the extent it contains terms that a court, applying the law that governs the trust, could not properly approve.
All indispensable parties must be bound. An agreement that leaves someone out does not bind them, and it can unravel later.
Settlement Agreement vs. Going to Court
The advantages of an agreement are speed, privacy, lower cost, and preserving family relationships, since both sides have a hand in the result. The disadvantages are that it requires cooperation and it is only as good as its drafting. A poorly drafted agreement can create the very dispute it was meant to prevent.
If the problem is a genuine mistake in the document, such as a wrong name or a missing provision, a court reformation may be the better path; see our guide to trust reformation in Nevada. If the trustee has discretion over distributions and the goal is better terms, trust decanting may avoid the need for anyone’s signature. Our overview on how to fix a bad trust in Nevada compares all three.
Tips for a Strong Agreement
- Describe the problem and the solution clearly, including the trust provisions involved.
- Identify every interested person and how each is signing, directly or through a representative.
- Have each party consider independent legal advice. An agreement one side did not understand is easier to attack.
- Address releases carefully. If the trustee is being released from liability, the agreement should say what is being released and why.
- Sign it formally and keep it with the trust records so future trustees and title companies can rely on it.
Frequently Asked Questions
Do all beneficiaries have to agree?
All indispensable parties must sign, or be properly represented, for the agreement to take effect on its own.
Is a settlement agreement as strong as a court order?
It is enforceable under NRS 164.940, but it is not a court judgment. If the parties want extra certainty, they can ask a court to approve it.
Can we use an agreement to change a trust after the settlor dies?
Yes, as long as it does not violate a material purpose of the trust. Our post on changing an irrevocable trust in Nevada explains the broader picture.
Can a settlement agreement resolve a family dispute over a trust?
Frequently. See our guide to settling a trust dispute in Las Vegas without litigation.
Work With a Nevada Trust Attorney
At Boyer Law Group, we help successor trustees and beneficiaries across Las Vegas, Henderson, North Las Vegas, and the rest of Nevada draft settlement agreements that hold up. To talk through your situation, schedule a free consultation or call (702) 778-4579.
Related reading: For the full picture, see our guide to changing an irrevocable trust in Nevada after the settlor dies. If you want help, here is what to expect when hiring a trust modification attorney in Las Vegas.
This article is general information about Nevada law, not legal advice for your situation.
Written by: Kim Boyer