New Florida legislation expressly authorizes mandatory arbitration clauses in wills and trusts

Effective July 1, 2007, Florida adopted legislation expressly authorizing mandatory arbitration clauses in wills and trusts.  The new statute provides as follows:

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 s. 44.104.

Two of the Florida attorneys instrumental in passage of the new legislation, Bruce M. Stone and Robert W. Goldman, also co-authored a 2005 ACTEC article discussing mandatory arbitration clauses in wills and trusts entitled Resolving Disputes with Ease and Grace.  The ACTEC article does a good job of summarizing the pros and cons of arbitration, concluding that arbitration is likely "ideal" in the following circumstances:

  1. Fee disputes, including fiduciary and legalfees
  2. Prudent investing disputes
  3. Document construction
  4. Principal and income disputes, includingadjustment powers
  5. Trust terminations or severances
  6. Accounting disputes
  7. Declaratory relief in general

This list of "ideal" abritration senarios implicitly recognizes that arbitration is NOT the best solution for resolving ALL disputes, a view I share and have written about [click here].

Sample arbitation clauses:

Sample clauses are often the best way to understand in concrete terms how a general concept may be applied in the real world.  Note that all of the sample clauses do two things:

  • require arbitration; and
  • define the procedural rules that would govern the arbitation proceeding (for example, who appoints the arbitrator, how many arbitrators are required, what are the discovery rules, etc). 

Under the new Florida arbitration statute, if the settlor does not identify  the procdural rules he or she would like to apply the default rules are provided by F.S. 44.104.

The AAA's website [click here] provides specific procedural rules for arbitrating such wills-and-trusts claims and the following sample arbitration clause:

AAA Standard Arbitration Clause:

In order to save the cost of court proceedings and promote the prompt and final resolution of any dispute regarding the interpretation of my will (or my trust) or the administration of my estate or any trust under my will (or my trust), I direct that any such dispute shall be settled by arbitration administered by the American Arbitration Association under its Arbitration Rules for Wills and Trusts then in effect. Nevertheless the following matters shall not be arbitrable questions regarding my competency, attempts to remove a fiduciary, or questions concerning the amount of bond of a fiduciary. In addition, arbitration may be waived by all sui juris parties in interest.

The arbitrator(s) shall be a practicing lawyer licensed to practice law in the state whose laws govern my will (or my trust) and whose practice has been devoted primarily to wills and trusts for at least ten years. The arbitrator(s) shall apply the substantive law (and the law of remedies, if applicable) of the state whose laws govern my will (or my trust). The arbitrator's decision shall not be appealable to any court, but shall be final and binding on any and all persons who have or may have an interest in my estate or any trust under my will (or my trust), including unborn or incapacitated persons, such as minors or incompetents. Judgment on the arbitrator's award may be entered in any court having jurisdiction thereof.

The authors of Resolving Disputes with Ease and Grace also provided four sample arbitration clauses, including the following two:

Generic provision—Short version:

It is my hope and expectation that there will be no dispute in relation to this Trust [my estate]. Nevertheless, if there is any dispute or controversy among any of the Trustee [personal representative] and the beneficiaries involving any aspect of this Trust [my estate] or its administration, the parties to the dispute may agree on the manner of resolution. If there is no such agreement, the disputing parties shall submit the matter to mediation, and, if unresolved by mediation, to binding arbitration. If a party to the dispute fails to participate in good faith in the mediation or arbitration, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from that party’s beneficial share or from other amounts payable to that party (including amounts payable to that party as compensation for services as a fiduciary).

Generic provision—Long version with forfeiture clause:

[Comment: As with other language in these sample clauses, the forfeiture provision in paragraph (c) below has not been tested in the courts. Assuming that a mandatory arbitration provision in a will or trust is otherwise enforceable in a given jurisdiction, it is believed that a forfeiture provision is likely to be enforceable also, including in jurisdictions that do not recognize the validity of no-contest provisions.]

(a) It is my hope and expectation that there will be no dispute in relation to this Trust [my estate]. Nevertheless, if there is any dispute or controversy among any of the Trustee [personal representative] and the beneficiaries involving any aspect of this Trust [my estate] or its administration, the parties to the dispute may agree on the manner of resolution. If there is no such agreement, the disputing parties shall submit the matter to mediation, and, if unresolved by mediation, to binding arbitration. If the parties are unable to agree on the selection of a mediator or arbitrator, the court having jurisdiction over this Trust [my estate] shall select the mediator or arbitrator. [The mediator or arbitrator shall have the following qualifications: ACTEC fellow; attorney with at least 10 years’ experience in trusts and estates; etc.]

(b) In the case of arbitration, the arbitrator shall establish the procedure for arbitrating the matter or matters and recognizing the goals of privacy, efficiency, less formality than in a judicial tribunal, and less expense than might be incurred in a judicial forum, while reaching a fair result. The decision of the arbitrator shall be final and binding on the Trustee [Executor], all beneficiaries, and their heirs, successors, and assigns. If the arbitrator determines that a guardian ad litem is needed to represent the interests of unborn, unascertained, or incapacitated interested persons, a guardian ad litem shall be appointed by the court having jurisdiction over this Trust [my estate].

(c) If a disputing beneficiary fails to participate in good faith in the agreed-on procedure for resolution, or in the mediation or arbitration if there is no such agreement, the disputing beneficiary’s interest in this Trust [my estate] shall be forfeited and the beneficiary, if an individual, shall be treated as having predeceased the Settlor [me] [with no surviving issue]. If for any reason it is determined by the court having jurisdiction over this Trust [my estate] that the foregoing provision for forfeiture is not effective, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from the beneficiary’s share or from other amounts payable to the beneficiary.

(d) The provisions of subparagraph (c) above shall not apply to the beneficial interests of:

(1) the Settlor’s [my] spouse, to the extent that his [her] interest would otherwise qualify for an estate or gift tax marital deduction;

(2) any beneficiary, to the extent that the beneficial interest would otherwise qualify for an income, gift, or estate tax deduction for charitable purposes unless and until all such charitable beneficial interests have expired.

If, however, the Settlor’s [my] spouse or any such beneficiary who is a disputing beneficiary to whom the above forfeiture provisions do not apply nevertheless fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from his, her, or its beneficial share.

(e) The acceptance of the Trust by any trustee or co-trustee constitutes the trustee’s or co-trustee’s agreement to comply with the above provisions. If a trustee or co-trustee is a party to a dispute and fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, it shall be deemed that the trustee or co-trustee has breached its fiduciary duties and has resigned, and the court having jurisdiction over this Trust is authorized to surcharge the trustee or co-trustee for costs, attorney’s fees, and any other sums deemed appropriate. [The personal representative’s consent to act constitutes his, her, or its agreement to comply with the above provisions. If a personal representative is a party to a dispute and fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, it shall be deemed that the personal representative has breached his, her, or its fiduciary duties and has resigned, and the court having jurisdiction over my estate is authorized to surcharge the personal representative for costs, attorney’s fees, and any other sums deemed appropriate.]

(f) If the validity of these provisions requiring arbitration is contested, the court having jurisdiction over this Trust [my estate] shall resolve that issue prior to resolution of the balance of the dispute. If the arbitration provisions are determined to be valid, the balance of the disputed issues shall be resolved as provided in this Article __.

Repeal of Florida's Dead Man's Statute

In re Amendments to the Florida Evidence Code, --- So.2d ----, 2007 WL 2002629 (Fla. Jul 12, 2007)

Florida's version of the "Dead Man's Statute" has been a trap for unwary litigants for over a century.  Widely criticized by commentators, practitioners, and even courts, in 2005 the rule was finally abolished when the Florida legislature repealed section 90.602, Florida Statutes.  For those interested in learning more about this evidentiary rule and why reform was needed, the 2005 legislative staff analysis is an excellent starting point.

In lieu of the Dead Man's Statute, the Florida legislature created section 90.804(2)(e), Florida Statutes (2005), which added an exception to the hearsay rule to permit relevant communications of deceased or incompetent persons to be heard by the trier of fact.  Due to a quirk of Florida's constitution, the Florida Supreme Court is required to approve this new evidentiary statute to the extent the new statute is deemed "procedural" in nature.  That's what the linked-to opinion is meant to do.

Understanding this rule of evidence is fundamental in the probate litigation context, which is why I've reproduced it below in its entirety:

90.804 Hearsay exceptions; declarant unavailable

(1) [No Change]

(2) HEARSAY EXCEPTIONS.-The following are not excluded under s. 90.802, provided that the declarant is unavailable as a witness:

(a)-(d) [No Change]

(e) Statement by deceased or ill declarant similar to one previously admitted.-In an action or proceeding brought against the personal representative, heir at law, assignee, legatee, devisee, or survivor of a deceased person, or against a trustee of a trust created by a deceased person, or against the assignee, committee, or guardian of a mentally incompetent person, when a declarant is unavailable as provided in paragraph (1)(d), a written or oral statement made regarding the same subject matter as another statement made by the declarant that has previously been offered by an adverse party and admitted in evidence.

Amendments To Florida Probate Rules

In In re Amendments To Florida Probate Rules, --- So.2d ----, 2007 WL 1932256 (Fla. Jul 05, 2007), the Florida Supreme Court adopted several amendments to our probate rules, all of which were proposed by the Florida Probate Rules Committee.  The following is the explanatory preamble to the rule changes, all of which will become effective on January 1, 2008:

BACKGROUND

On January 29, 2007, the Florida Probate Rules Committee (Committee) filed a regular-cycle report recommending amendments to several of the Florida Probate Rules, as well as the adoption of two new rules. The Committee proposes amendments to existing rules 5.040 (Notice); 5.041 (Service of Pleadings and Papers); 5.200 (Petition for Administration); 5.210 (Probate of Wills Without Administration); 5.241 (Notice to Creditors); 5.490 (Form and Manner of Presenting Claims); 5.496 (Form and Manner of Objecting to Claim); 5.498 (Personal Representative's Proof of Claim); 5.499 (Form and Manner of Objecting to Personal Representative's Proof of Claim); 5.530 (Summary Administration); 5.650 (Resignation or Disqualification of Guardian; Appointment of Successor); 5.670 (Termination of Guardianship on Change of Domicile of Resident Ward); 5.697 (Magistrate's Review of Guardianship Accountings and Plans); and 5.710 (Reports of Public Guardian). It further proposes the adoption of two new rules: rules 5.095 (General and Special Magistrates) and 5.645 (Management of Property of Nonresident Ward by Foreign Guardian).

DISCUSSION

After the Committee filed its report with the Court, the Court published the proposed amendments in The Florida Bar News. Sean O. Cadigan and Keela Roberts Samis, both members of The Florida Bar, filed a joint comment, the only one filed. Cadigan and Samis, both of whom have served as magistrates in probate cases, suggested the addition of a sentence to the end of subdivision (e) in rule 5.697 to read: “The magistrate shall be required to file a report only if a hearing is held pursuant to subdivision (d) of this rule or if specifically directed to do so by the court.” They believed the additional sentence would make it clear that a magistrate would not need to prepare and file a magistrate's report or adhere to the exception period when the magistrate assists the court in the review of guardianship reports, but does not conduct a hearing to review the report.

In its response to the comment, the Committee agreed that the addition of the sentence proposed by Cadigan and Samis would avoid a possible misinterpretation of the rules and asked the Court to incorporate the sentence proposed by Cadigan and Samis into its proposal.

CONCLUSION

Having taken the proposed amendments, the comment, and the Committee's response into consideration, we hereby adopt the amendments to the Florida Probate Rules as set forth in the appendix to this opinion, including the additional sentence at the end of subdivision (e) in rule 5.697, suggested by Cadigan and Samis. New language is indicated by underscoring; deletions are indicated by struck-through type. The committee notes are offered for explanation only and are not adopted as an official part of the rules. The amendments will become effective on January 1, 2008, at 12:01 a.m.

Florida's New Trust Code

Florida's new trust code becomes effective on July 1, 2007.

As Florida practitioners (and courts) work their way through this comprehensive statute, there are a few resources all should keep handy until we start getting some appellate opinions construing the new code:

  • Final Committee Draft of FTC.  Contains cross references to all corresponding Uniform Trust Code provisions.  UTC commentary should be helpful in the absence of Florida appellate opinions.
  • Prof. Powell's two Florida Bar Journal Articles explaining the new FTC (see here and here).
  • Prof. Powell's Scrivener's Summary of the FTC.  The PDF version of this excellent resource has been removed from the web.  You can get a clean copy of this document by ordering the Florida Bar CLE materials covering the new FTC (see here).
  • UTC Reporter's Summary of FTC.

2007 Amendments to Florida Probate Rules

In re Amendments to Florida Probate Rules, --- So.2d ----, 2007 WL 268753 (Fla. Feb 01, 2007)

To those of us who live in this world, new probate rules are yet another piece of the puzzle to keep up with.  So here you are.  Below is the Florida Supreme Court's preamble and order making the changes effective immediately.

PER CURIAM.
This matter is before the Court for consideration of proposed amendments to the Florida Probate Rules. We have jurisdiction. See art. V, § 2(a), Fla. Const.

On October 30, 2006, the Florida Probate Rules Committee (Committee) filed a fast track report recommending various amendments to the Florida Probate Rules in response to 2006 legislation. The Committee has proposed amendments to a number of rules, mostly in response to statutory changes made by chapters 2006-77 and 2006-178, Laws of Florida. Chapter 2006-77 became effective June 6, 2006, and chapter 206-178 became effective July 1, 2006. In addition, the Committee has recommended amendments to several rules in order to reflect the recent renumbering of the Florida Rules of Judicial Administration. See In re Amend. to Fla. Rules of Jud. Admin., 939 So.2d 966 (Fla.2006). All proposed amendments were approved by unanimous vote of the Committee and the Executive Committee of The Florida Bar Board of Governors. The Committee published the proposals in the November 1, 2006, edition of The Florida Bar News, with a request that comments be filed directly with the Court. No comments have been filed.

Accordingly, upon consideration of the Committee's report and the relevant legislation, we hereby amend the Florida Probate Rules as reflected in the appendix to this opinion. New language is indicated by underscoring; deletions are indicated by struck-through type. The committee notes are offered for explanation only and are not adopted as an official part of the rules. The amendments shall become effective immediately.

It is so ordered.

New Amendments to the Florida Probate Rules (Two-Year Cycle)

The Florida Probate Rules are amended regularly in two-year cycles. The Florida Supreme Court just published these amendments to the Florida Probate Rules as part of that cycle, effective January 1, 2006.

Florida Uniform Disclaimer of Property Interests Act

Effective July 1, 2005, Florida enacted the Florida Uniform Disclaimer of Property Interests Act. Although the Florida statute is modeled on the Uniform Act, it is reported to contain substantial enhancements as well. The Wills, Trusts & Estate Prof Blog reported here the following comment by one of the statute's lead authors:

The variations are so significant that Adam Hirsch, the William and Catherine VanDercreek Professor of Law at Florida State University, says that "it may fairly be described as an alternative model, potentially worthy of contemplation by other state drafting committees."

2005 Florida Legislative Update

For the benefit of the rest of Florida, here is a copy of the 2005 legislative summary presented by Michael Dribin of Broad and Cassel to the Probate and Guardianship Court Committee of the Dade County Bar Association. Enjoy!

Selected Florida Statutes Relevant to Wills, Trusts and Estates Matters in Florida

Florida's Constitutional Homestead Protection

Article X, Section 4, Florida Constitution

Florida's "Probate Code" is contained in Chapters 731 -- 735 of the Florida Statues.

Ch. 731 General Provisions
Ch. 732 Intestate Succession of Wills
Ch. 733 Administration of Estates
Ch. 734 Foreign Personal Representatives; Ancillary Administration
Ch. 735 Small Estates

Other relevant statutes include the following:

Ch. 198 Estate Taxes
Ch. 738 The Florida Uniform Principal and Income Act
Ch. 744 Guardianship
Ch. 747 Conservatorship
Ch. 765 Health Care Advance Directives (e.g., Living Wills)

Probate and Guardianship matters in Florida are administered pursuant to the following rules of procedure:

Probate Rules (2005 Edition)

October 1, 2004 Amendments to Probate Rules

2005 Biennial Report of the Florida Probate Rules Committee

Cover Letter
Report
Appendix A
Appendix B
Appendix C