Historically, the rules have been such that beneficiaries to a will or a trust are not bound or forced to present their claims pursuant to “binding arbitration clauses” that were drafted into a will or a trust by the decedent prior to his or her death. The rationale to not enforce arbitration clauses in wills and trusts was that only voluntary parties to a contract, where both parties were providing consideration, could be forced to abide by the terms of an arbitration clause in the contract. Based on the fact that in a will or trust situation there is no “consideration exchange” dealing with a will or trust that contains a binding arbitration clause, courts did not enforce or require individuals to abide by the terms of the arbitration clauses. As a result, courts historically have not required will or trust beneficiaries to be bound to pursue their claims through binding arbitration as opposed to filing a claim in probate court in spite of presence of an arbitration provision in a will or trust.
Change in Law
Recently, courts in other states have found that arbitration provisions appearing in wills or trusts that require the resolution of claims or disputes over a will or a trust, with the exception of disputes going to the validity or testamentary capacity of the individual to execute a will or a trust, are enforceable. In July 2013,Michigan’s state legislature amended a change to its version of the Revised Uniform Arbitration Act from “written contract” to “written agreement.” As a result, presumably a Michigan probate court would follow the same analysis that the courts in other states have followed in finding that binding arbitration provisions in a trust or a will would be enforceable in certain circumstances.
As a result of the aforementioned change in the Michigan law and similar changes in other states’ laws, there is a significant change happening when it comes to alternative dispute resolution or arbitration in probate litigation where parties are filing claims regarding various terms and conditions of wills and trust agreements. Twenty-two states have now adopted the Revised Uniform Arbitration Act, which means that they permit binding arbitration in “agreements,” which now extends interpretation of the application of the arbitration provisions to wills and trusts, where before it was limited to purely contractual-type documents. Michigan was the 22nd state based on our change in law last year to shift the definition from the jurisdiction of the arbitration clause from a “written contract” to “written agreement.” While this change will not prevent claims in probate court challenging the validity of wills and trust, it should lead to forced binding arbitration of disputes that arise over the administration over wills and trusts by fiduciaries and many of the other types of claims made by a disgruntled beneficiary. Although binding arbitration may neither be the best nor the most economical solution to post the disputes regarding wills and trusts, many fiduciaries or individuals who are subject to claims regarding wills and trusts are not thrilled to be sued in public court due to the possible damage to their reputations. Many personal representatives or successor trustees of wills or trusts are concerned about dysfunctional families using the death of an individual as a reason to continue, if not escalate, the family’s dysfunction, and thus the personal representative or trustee would like to keep the family feuding out of the public eye, which binding arbitration would hopefully achieve.
When discussing your estate plan with your lawyer, you may want to consider discussing the advantages and disadvantages of placing an arbitration provision in your will or trust agreement that would require your heirs and beneficiaries to file many claims relating to their dissatisfaction or problems with a will or a trust in an arbitration proceeding, as opposed to the local probate court.