Arbitration Clauses in Wills and Trusts – Pros and Cons to Consider

Any Palm Beach Probate Attorney can tell you that the Probate Courts are underfunded, and that means lengthy space between hearings, over worked judges and sometimes-unsatisfactory results. The thing to remember is that Florida Courts are less like the DMV and more like the Post Office. I say this because, there is a private alternative if you are unsatisfied, specifically alternative dispute resolution. Given the fact that Florida does not give jury trials for contested probate and trust proceedings, these cases may lend themselves very well to switching to a private forum, the arbitration room. 

• Florida Statute 731.401 is a Statutory Authorization of Mandatory Arbitration Clauses in Wills & Trusts.
• 731.401 Arbitration of disputes.—

(1) A provision in a will or trust requiring the arbitration of disputes, other than disputes of the validity of all or a part of a will or trust, between or among the beneficiaries and a fiduciary under the will or trust, or any combination of such persons or entities, is enforceable.

(2) Unless otherwise specified in the will or trust, a will or trust provision requiring arbitration shall be presumed to require binding arbitration under chapter 682, the Revised Florida Arbitration Code. If an arbitration enforceable under this section is governed under chapter 682, the arbitration provision in the will or trust shall be treated as an agreement for the purposes of applying chapter 682.

• This statute was adopted in 2007. Prior to this there was legitimate debate within the legal community as to whether a mandatory arbitration clause was allowable in this context.
• The AAA (American Arbitratin Association) and several other organizations offer templates for these clauses but its advised you speak with an attorney before amending or creating a will with an arbitration clause.

After 2007 the question was no longer if these clauses were enforceable but rather how to enforce them. The goal is to have a comprehensive set of rules governing the arbitration of your trust or will.  There are several different approaches in this regard.

1. Custom Rules can be crafted by you individually or by a retained counsel, however these rules will be long, complex and likely imperfect given the lack of foreseeability of these types of disputes.
2. The AAA offers rules that are drafted by experts, updated regularly and reflect the common practices of season arbitrators, and these rules can be adapted to the circumstances, a will contest.

In fact according to the AAA, “Every year billions of dollars are administered by executors and trustees. Wills, transferring property to beneficiaries, are the most frequently used instruments, but family trusts, charitable trusts, and commercial trusts are growing in use and scope. Occasionally, disputes arise over whether those funds are being properly administered and whether the governing will or trust is being interpreted correctly by the fiduciary. . . . Many of these disputes can be resolved by the use of mediation or arbitration, processes that provide parties with an alternative means to resolve their disputes. . . . Arbitration is an effective way to resolve these disputes privately, promptly, and economically, utilizing as the arbitrator a lawyer or lawyers with substantial experience in the area of wills, trusts and estates.

. . . The AAA Wills and Trusts Arbitration Rules and Mediation Procedures provide that the arbitrator, at his or her discretion, may provide for the protection of unrepresented parties, including the use of a guardian ad litem to represent any minor, incapacitated, or unborn beneficiary . A written reasoned award is required under the AAA Wills and Trusts Rules. Testators or settlors can require that future disputes be arbitrated by inserting the following clause into their wills and trusts in most jurisdictions.” Introduction to AAA’s New Wills and Trusts Arbitration Rules and Mediation Procedures.

There are several considerations to make before opting out of the Probate courts and choosing arbitration.

• Pro #1: f your arbitration clause is properly drafted, your case gets decided by a specialized trusts and estates lawyer (or lawyers) with real-life experience handling complex estate matters (usually 10+ years) vs. a randomly assigned state-court judge, who almost never has any private-practice experience dealing with complex estate matters (most judges are former prosecutors)
• Pro #2: by privatizing the process the parties can, to the extent permitted by F.S. 731.401 (and there are limitations), opt out of the dysfunctions inherent to an overworked and underfunded public court system that asks our probate judges to juggle thousands of cases at a time. (In Miami-Dade – on average – each probate judges took on 2,848 new cases in FY 2012-13, and in Broward the figure was even higher at3,105/judge.)
• Con #1 Arbitration is not free and these fees may exceed the court costs of a probate trial.
• Con #2 Arbitrator awards are not subject to the same procedural safeguards and reviews that trial courts promise.