Page 29 - December 2019 Bar Journal

ESTATE PLANNING FEATURE

disputes involving “the validity of all or a Until these arguments are
part of the trust instrument[.]” This means court vetted, though, some
Ohio’s trust-arbitration statute is available uncertainty regarding a trust- PROS & CONS
as to issues of interpretation, construction, arbitration clause’s enforceability OF TRUST ARBITRATION
administration, discretion, etc. will remain. Regardless,
For attorneys with commercial- estate planners can tell their ADVANTAGES
litigation backgrounds, extra-judicial clients that the Ohio General
proceedings in which a neutral party Assembly’s passage of H.B. 595 • Flexibility: Settlor chooses the arbitrator or the
hears facts and law before issuing a demonstrates the legislature’s criteria for selecting the arbitrator, decides the
binding determination upon the parties is support for trust arbitration. procedure/governing rules, allocates responsibility,
nothing new. Many people unknowingly Whether the clients need an and defines the type of disputes to be arbitrated.
submit to arbitration clauses each day arbitration clause is another • Finances: Can be faster and cheaper than standard
when they click online forms or open question. Arguments can be litigation, and the ability to allocate costs to the
bank accounts. made that trust arbitration’s losing party or as part of administrative expenses
Arbitration is unfamiliar to estate- advantages — the flexibility for can help encourage resolution.
planning attorneys because an arbitration the settlor to set out the process,
clause’s enforceability depends upon mutual the ability to avoid the cost of • Finality: The decision will be binding on all
consent — often set out in a written contract litigation, and the finality of parties, and there will be limited ability to appeal
that all parties sign. Since a trust is not arbitration decisions — are also as an arbitration award can be overturned
pursuant to only R.C. § 2711.10.
a contract, the ability to submit a trust’s weaknesses, but this is a decision
beneficiaries to binding arbitration — even for the settlor to make with the • Privacy: As much trust planning is done to avoid
with R.C. §5802.05 — raises uncertainty assistance of counsel. probate and public records, arbitration helps
that could deter many estate planners from At the very least, estate maintain privacy and prevents precedent from
recommending such provisions. planners can tell clients that one being created.
The arguments for enforcing trust- drafter of the U.S. Constitution
arbitration provisions can be distilled to believed estate arbitration was a DISADVANTAGES
(1) intent and (2) equitable estoppel. As good idea.
the Ohio Supreme Court of Ohio held • Novelty: While states such as Washington
(2001), Arizona (2008), Florida (2013, and this
in Pack v. Osborn, 117 Ohio St.3d 14 state allows arbitration clauses in both wills and
(2008), a court’s primary responsibility Timothy Gallagher trusts), Missouri (2013), New Hampshire (2014),
when reviewing a trust is to ascertain is an attorney at and South Dakota (2015) have passed legislation
the settlor’s intent. Similarly, Ohio courts Reminger Co., LPA allowing Trust arbitration, the concept remains
should give weight and deference to a and practices largely untested in the courts.
settlor’s intent to include an arbitration primarily in the
clause. The Supreme Court of Texas’s firm’s Estates, Trusts, and • Flexibility: Vague or ambiguous arbitration
holding in Rachal v. Reitz, 403 S.W.3d 840, Probate Litigation practice provisions could lead to further disputes about
the process, unintended delay, and placement of
847 (Tex. 2013) summarized the equitable group. He has been CMBA too much discretion in the arbitrator that could
estoppel argument as “a beneficiary who member since 2017. He can be diminish procedural safeguards in place from the
attempts to enforce rights that would not reached at (216) 687-1311 and Rules of Evidence and Civil Procedure.
exist without the trust manifest[s] her tgallagher@reminger.com.
assent to the trust’s arbitration clause.” • Finances: The arbitrator will expect payment from
Santa Clara University School Law the trust or its beneficiaries that, coupled with the
Professor E. Gary Spitko took these Paul Shugar is an respective costs each beneficiary incurs, can add
up quickly.
arguments even father in The Will As An attorney at Reminger
Implied Unilateral Arbitration Contract, Co., LPA and • Finality: As arbitration awards cannot be
68 Fla. L. Rev. 49 (2016). In that article, practices primarily in overturned or modified easily — and only upon
Spitko argued that an implied contract the firm’s Estates, the arbitrator overstepping his/her authority or
arises between a testator and the state Trusts, and Probate Litigation other misconduct occurring — an improper
for the state to honor the testator’s practice group. He has been CMBA arbitration decision can be difficult to correct.
donative intent. Spitko claims that, in member since 2010. He can be • Involuntary: U.S. Supreme Court precedent
consideration for the testator creating reached at (216) 687-1311 or recognizes that arbitration is strictly a matter
and preserving wealth to the benefit pshugar@reminger.com. of consent. As arbitration usually results from
of the state, the state should honor the two parties mutually consenting to the process
testator’s intent regarding how that as part of a contract, there are questions about
wealth is distributed upon death. This Further information on this topic trust arbitration’s enforceability without the
argument could be used in support of an can be found at reminger.com/ beneficiaries’ mutual consent.
arbitration clause’s enforceability. OhioEstateandTrustDispute.

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