The Eastern Washington county was a defendant in a civil lawsuit filed last year by Robert Iseli and Clair and Arlene Neer. Iseli was the father of Lee Iseli, 4. The Neers were the parents of William and Cole Neer, 10 and 11.
Dodd murdered the Neer brothers in David Douglas Park in September 1989. He killed Lee Iseli in Dodd's east Vancouver apartment in October 1989.
Dodd was named as a defendant but had no assets when he was executed last January.
The parents claimed Dodd should have been behind bars at the time of the killings.
Lawyers did not disclose how the $275,000 settlement would be divided between the two families.
In August, the state agreed to a $100,000 out-of-court settlement to be divided between the two families. Bellevue psychologist Kenneth Von Cleve, another defendant in the suit, also settled out of court. The amount was kept confidential.