Using Arbitration to Resolve Estate and Trust Disputes
Resolving estate and trust disputes is rarely simple as several different parties with conflicting interests are typically involved. When possible, trying to resolve these types of disputes outside of a courtroom can be advantageous for all involved. One way to resolve estate and trust disputes without a judge or jury is through arbitration.
What Is Arbitration
Arbitration is an alternative dispute resolution method used in many business and commercial settings where the parties have agreed by contract to arbitrate their disputes. Arbitration involves hiring a private, third-party decision maker, an arbitrator (or a panel of arbitrators), selected by the parties to hear a dispute and to make a binding arbitration award resolving it. Generally, arbitration awards cannot be appealed or challenged except in very limited circumstances, and both state and federal law provide procedures for enforcing the award, if necessary.
How Arbitration Is Different Than Mediation
In most disputes involving estates and trusts, there is no contract that requires that the parties arbitrate the dispute, and therefore, if alternative dispute resolution is used, mediation is the preferred method. Mediation is fundamentally different from arbitration. In mediation, the mediator has no decision-making power and the mediator's job is to help the parties voluntarily reach an agreement that resolves the dispute. In a mediated resolution, the parties will have to compromise their respective positions to reach agreement. In arbitration, the arbitrator makes the decision, it is usually final, and the arbitration award may be totally in favor of one party or the other. Mediation produces results that the disputing parties decided were good enough; whereas arbitration can produce a total win or a total loss that cannot be changed.
Arbitration is often criticized by lawyers and consumer advocates because it deprives consumers of the right to a jury trial, the right to a meaningful appeal and other rights and procedures designed to produce a fair resolution of claims under the rule of law. Although arbitration is promoted as faster and less expensive than court proceedings, that is not always the case. In some circumstances, the arbitration proceedings become complex and require just as much time and effort to litigate as a court proceeding, without the procedural and legal protections afforded to litigants in the court system.
Using Arbitration to Resolve Estate and Trust Disputes
Nevertheless, arbitration can be a useful tool to resolve disputes fairly in estate and trust matters. We often include arbitration clauses in settlement agreements to deal with issues that the parties can reasonably anticipate will arise in implementing the settlement. Where the parties reach a resolution of a complex matter in mediation, we will sometimes ask the mediator to serve as an arbitrator of any future disputes regarding the settlement and will include an arbitration clause in the settlement agreement contract.
Settlement Agreements With Arbitration Provisions
Watson Bonander has had cases where the settlement agreement resolving an estate and trust dispute included a provision that would require additional action or payment by one of the parties if certain events occurred in the future, perhaps many years in the future. In order to avoid litigation over that future event, we have included an arbitration clause in the settlement agreement so that any dispute over the future contingency would go to arbitration and thereby avoid the delay and expense of another round of litigation in court. Our experience has been that arbitration in these circumstances is faster and less expensive than going back to court to get a ruling on the meaning and application of the settlement agreement.
So, arbitration can be a useful tool in resolving estate and trust disputes. The benefit of including an arbitration clause in a settlement agreement depends on the circumstances of the case. Where the settlement agreement provides for future actions that depend upon future contingencies, an arbitration clause should definitely be considered.