Native American Families Should Plan Ahead For Cobell Settlement Payments

With President Obama’s recent signing of the Cobell lawsuit settlement approval legislation, the 15+ year legal effort to secure financial compensation for Native Americans in the courts finally reached conclusion. That landmark event is, however, more of a “beginning” than the end of the work to deliver long-overdue compensation to hundreds of thousands of Native Americans throughout the country.

The Cobell settlement law will ultimately provide $3.4 Billion in cash payments to Native Americans who have ownership rights in one or both of two categories:

Payments for Individual Money Accounts: Congress has allocated $1.4 Billion to compensate Native Americans who hold government issued Individual Money Accounts, which were supposed to receive deposits from the federal government from sources such as lease revenues from oil drilling on Tribal land. People who hold Individual Money Accounts will receive varying sums of money from the settlement, depending on the determination of how much money the government should have allocated to a person’s account over the years.

Payments for Land Shares: Congress has allocated $2 Billion to buy back the “fractionated” land shares held by many Native Americans, which have often resulted in dozens of people being owners of a small percentage of a piece of land that previously belonged to their Tribe. People who hold these ownership shares in land will have the option to sell them back to the government, which will then turn the land back over to the Tribe to be placed in trust. The amount of money the government will pay for a given share of land ownership has not yet been determined.

For Native Americans who will be eligible to receive compensation under one or both of these ownership rights, it is important to think ahead about personal financial planning. It is a tragic historical fact that generations of Native Americans were denied the information and services they deserved to help take care of their families’ finances. Today, few people realize that estate planning for Native Americans is subject to a special federal law known as the American Indian Probate Reform Act, or “AIPRA”. This law sets out specific requirements and procedures that only apply to Native Americans, and which must be followed in order to ensure that assets held by Native Americans can pass to the next generation the way a person intends.

Without an AIPRA-compliant estate plan, your money or trust lands may not pass to your descendants in the manner and proportions you desire, or may not pass to your descendents at all. The only way to be sure that your interests in trust lands end up being inherited by the people you want, particularly if you have small or fractionated interests in land or other assets, is to have a will that meets the requirements of AIPRA.

Creating an estate plan that complies with AIPRA will help you:

• Ensure your intended heirs are eligible to receive your interests in trust lands;
• Prepare a will that conveys your interests the way YOU want them to pass;
• Avoid the default provisions of AIPRA, such as transfers to single heirs and/or forced sales.

The first step for all Native Americans who seek to receive a payment under the Cobell settlement is to collect all of the information and documentation possible regarding your family’s ownership in Tribal lands and Individual Money Accounts. This information will be crucial in proving eligibility for payments. Even before the payments are issued, it makes sense to begin the financial planning that will ensure the money received is properly held for the family’s benefit. To discuss financial and estate planning and how to ensure your family’s plan will be compliant with AIPRA, you can contact Foster Pepper’s Native American Legal Services attorneys Duncan Connelly or Greg Guedel, via email through the links on their names or by phone at 206.447.4400.

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