Trusts and Estates

Ca. Trs. & Estates Quarterly 2014, Volume 20, Issue 2

BRINGING BENEFICIARIES TO THE MEDIATION TABLE: DRAFTING ENFORCEABLE TRUST PROVISIONS REQUIRING MEDIATION OF DISPUTES DURING POST-DEATH TRUST ADMINISTRATION

By Christopher D. Carico, Esq.* and Golnaz Yazdchi, Esq.*1

I. INTRODUCTION

Mediation, when available, continues to be an effective, cost-efficient tool for resolving contested probate matters. Until 2007, the local probate rules of some of the larger California counties gave the probate court the explicit power to compel mediation in contested probate matters.2 This power vanished in California with the holding in Jeld-Wen, Inc. v. Superior Court.3 Estate planning clients often prefer the concept of mediation in the place of protracted litigation to resolve potential future disputes among family members concerning administration of their estate plans. Carefully-drafted trust provisions utilizing conditional gifts can serve to give an incentive to the beneficiaries and trustees to enter into a binding agreement at the outset of the administration to mediate future disputes. This agreement to mediate in turn can empower the court to compel mediation when disputes later arise, without violating the public policy concerns addressed in Jeld-Wen.

This article begins by reviewing current California law relating to the enforcement of settlor-imposed conditions on the receipt of gifts, including a requirement in the trust instrument that the parties agree to mediate any future disputes as a condition precedent to receiving the gift. It then discusses the public policy considerations that could restrict the enforcement of a mandatory mediation provision, namely, voluntariness, access-to-justice, unconscionability, and avoidance of forfeitures. The article continues with the authors’ recommendations on how to draft mediation provisions into the trust instrument to avoid public policy pitfalls. The article concludes with suggested trust language that conditions gifts on signing an agreement to mediate future disputes, followed by a sample agreement to mediate.

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