Dra$ing and Enforcing Arbitra1on Clauses in Wills, Trusts & Se<lement Agreements W. CAMERON MCCULLOCH MACINTYRE, MCCULLOCH, STANFIELD & YOUNG, LLP
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1 Dra$ing and Enforcing Arbitra1on Clauses in Wills, Trusts & Se<lement Agreements W. CAMERON MCCULLOCH MACINTYRE, MCCULLOCH, STANFIELD & YOUNG, LLP PROBATE, TRUSTS & ESTATES SECTION OF THE DALLAS BAR ASSOCIATION NOVEMBER 22, 2016
2 What you should do Though&ully consider the use arbitra4on provisions Though&ully consider why an arbitra4on might be beneficial to the estate plan Use arbitra4on provisions to save money, expense, and li4ga4on
3 What you shouldn t do Add an arbitra4on clause to every will you dra> Add an arbitra4on clause without considering the implica4ons of the provision Add an arbitra4on clause without providing the necessary informa4on to properly implement the clause
4 Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013) Changed the landscape of arbitra4on provisions in trusts/wills
5 Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013) VS.
6 Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013) Changed the landscape of arbitra4on provisions in trusts/wills Dispute between trustee and beneficiary governed by arbitra4on provision Texas Supreme Court finds that beneficiary assented to arbitra4on clause by accep4ng benefits
7 Effect of Rachal v. Reitz Court did not address arbitra4on provision in a will If a beneficiary accepts a benefit under a will, he may assent to the arbitra4on provision Raises several issues: Dependent Administra4ons Court s ability to supervise administra4on Pre-probate challenges to a will with arbitra4on clause
8 What is arbitra1on? Claims submiled to arbitrator who makes a determina4on regarding the claim ADR mechanism that resolves a maler outside of court Unlike media4on party cannot unilaterally withdraw Arbitrators can be selected by par4es or a procedure for selec4on can be set forth in the document Agreement can dictate applicable law and venue Arbitra4on can be confiden4al
9 Should you include arbitra1on clause in your document? Why you should: Faster and less conten4ous Arbitrator could be expert in probate Avoids publicity Limited discovery Relaxed rules/atmosphere
10 Should you include arbitra1on clause in your document? Why you should NOT: Costs may the same as trial Poten4al lack of appeal Limited discovery could mean difficulty in geung necessary evidence Poten4ally inconsistent rulings If arbitra4on provision is not well wrilen, court interven4on may s4ll be necessary
11 Five Ques1ons when dra$ing Arbitra1on Clauses Number ONE: What arbitra4on rules should apply? TAA AAA
12 Five Ques1ons when dra$ing Arbitra1on Clauses How many arbitrators should be used? Number Selec4on Process
13 Five Ques1ons when dra$ing Arbitra1on Clauses What qualifica4ons should the arbitrator(s) have? Years prac4cing in the field ACTEC member Trial experience
14 Five Ques1ons when dra$ing Arbitra1on Clauses Will Arbitra4on be binding? Does the loser get a doover? Court ac4on may s4ll be required
15 Five Ques1ons when dra$ing Arbitra1on Clauses How do you bind all necessary par4es? Minors Guardians ad litem Virtual Representa4on
16 Avoiding an Arbitrator s Award Discussed in Leonard K. Hoskins vs. Colonel Cli2on Hoskins and Hoskins, Inc. decided by Texas Supreme Court in 2016
17 Avoiding an Arbitrator s Award Arbitra4on award can only be vacated by a court if there is evidence of one or more of the following: That the award was obtained by corrup4on, fraud, or other undue means; That the rights of a party were prejudiced by evidence par4ality by an arbitrator appointed as a neutral; That the arbitrator commiled misconduct or willful misbehavior; That the arbitrators exceeded their powers; That the arbitrators refused to postpone the hearing a>er a showing of sufficient cause for postponement That the arbitrators refused to hear evidence material to the controversy; That the arbitrators conducted the hearing, contrary to various statutory provisions, in a manner that substan4ally prejudiced the rights of a party; or That there was no agreement to arbitrate, the issue was not adversely determined in a proceeding, and the party did not par4cipate in the arbitra4on hearing without raising the objec4on.
18 Summary Carefully consider if you need the arbitra4on clause Carefully consider the terms of the clause Which Rules? Which Arbitrator? Qualifica4ons Binding nature Fees Be though&ul about what the provisions will do once the clause is invoked
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