Litigation involving estates and trusts, while sometimes impossible to avoid, is usually exhausting to all parties involved, especially given that such litigation is often among family members and/or is following the death of a loved one. Alternative dispute resolution (“ADR”) is an alternative to traditional litigation, encompassing various methodologies, including mediation and arbitration, aimed at resolving disputes outside the traditional courtroom setting. The use of ADR can provide a more efficient, cost-effective, and private means of resolving conflicts, and Mississippi law recognizes the importance of ADR in estate and trust disputes, as reflected in both state statute and case law.
Mediation or Arbitration, Generally
Mediation is a voluntary process in which a neutral third-party mediator assists the disputing parties in reaching a mutually acceptable settlement. Mediation is encouraged in estate and trust disputes due to its collaborative nature and the potential to preserve familial relationships. By fostering a cooperative environment, mediation can help parties find common ground and develop creative solutions that a court might not be able to impose, particularly in will contests and trust disputes where emotions run high and relationships may be at stake. Additionally, within the context of trust administration, state statute provides that a mediator is allowed to award fees and other reasonable costs against the assets of the trust.[1] While this statute illustrates the legislature’s endorsement of mediation, particularly in the trust and estates context, as good public policy, in practice, a mediator does not “award” fees, but rather acts as an intermediary seeking to bring the parties to an agreeable solution. Also note that mediation is generally not binding on the parties to an action but rather results in a separately enforceable settlement agreement among the parties.
Arbitration is another form of ADR where a neutral arbitrator (or a panel of arbitrators) hears the evidence and arguments from the disputing parties and then renders a binding decision. Unlike mediation, where the parties may (if mediation is successful) enter into a separately enforceable settlement agreement, arbitration results in a decision that is typically final and enforceable by the courts. Like mediation, any fees or costs awarded by the arbitrator can be charged against the trust’s assets.[2] Arbitration can be a more formal process compared to mediation, but it still offers the advantages of reduced time and expense compared to traditional litigation.
Mississippi Case Law Favors ADR
Generally, Mississippi courts adhere to the federal policy of favoring arbitration and arbitration agreements.[3] With specific regard to estate disputes, Mississippi courts favor family agreement made after the death of the decedent from who the estate is derived.[4] Further, the courts go far as to say settlement agreements are valid and enforceable without consideration being expressly given,[5] as the avoidance of “serious, vexatious, and expensive litigation,” through the mutual promises of the parties, is sufficient enough consideration for these agreements to remain enforceable.[6]
While ADR methods like mediation and arbitration are highly encouraged, judicial oversight remains an integral part of the dispute resolution process in estate and trust matters. The chancery court in Mississippi retains exclusive jurisdiction (or concurrent jurisdiction with other state courts) over trust administration issues;[7] however, the courts are supportive of ADR and often encourage parties to seek mediation or arbitration before resorting to full-scale litigation. The courts’ endorsement of ADR is evident from the statutory framework, which allows for the allocation of fees and costs associated with ADR processes to be borne by the subject trust’s assets.[8]
Mississippi Trust Code – Nonjudicial Settlement Agreements
With regard to trusts, the trustee and qualified beneficiaries[9] of a trust may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust.[10] Unlike arbitration and mediation, where litigious contention and disagreement is already present, nonjudicial settlement agreements can also prove useful in times where the trustee and qualified beneficiaries agree on a given action at a point in time and do not wish for court oversight in undertaking such action but would like to expressly memorialize the parties’ agreement of the action in case of future contention.
Matters that may be resolved by a nonjudicial settlement agreement include the interpretation or construction of the terms of the trust; the approval of a trustee’s report or accounting; direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power; the resignation or appointment of a trustee and the determination of a trustee’s compensation; transfer of a trust’s principal place of administration; liability of a trustee for an action relating to the trust; the extent or waiver of bond of a trustee; the governing law of the trust; and the criteria for distribution to a beneficiary where the trustee is given discretion.[11]
Notwithstanding the unquestioned utility of a nonjudicial settlement agreement, it is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the court.[12] Additionally, any trustee or qualified beneficiary may request the court to approve a nonjudicial settlement agreement.[13]
Practical Considerations for ADR in Estate/Trust Actions
When considering ADR for estate and trust actions in Mississippi, several practical considerations must be taken into account. First, the selection of a mediator or arbitrator is crucial. Parties should choose an individual with experience in estate and trust law and a reputation for impartiality and fairness. One significant advantage of ADR is the confidentiality it offers, allowing parties to discuss sensitive family matters without the public exposure that comes with court proceedings. Though ADR is generally less expensive than litigation, costs can still be substantial. However, costs associated with mediation or arbitration can be charged against the trust’s assets, alleviating the financial burden on individual parties.[14]
Parties should also be aware that arbitration decisions are typically binding and enforceable with limited grounds for appeal. This finality can be advantageous in providing closure but also means that parties must be willing to accept the arbitrator’s decision. Further, multi-party actions generally complicate the ADR process, as having three or more parties, each with their own separate wants, wishes, and agendas, can obviously result in additional challenges to reaching an agreeable solution, if any solution is reached at all. Finally, ADR processes offer greater flexibility in scheduling and procedure compared to court proceedings. This flexibility can be particularly beneficial in accommodating the needs and availability of all parties involved.
Conclusion
ADR methods, including mediation and arbitration, play a critical role in the resolution of estate and trust contests in Mississippi. By providing a more efficient, cost-effective, and private means of resolving disputes, ADR can help preserve familial relationships and achieve more satisfactory outcomes for all parties involved. As such, lawyers and their clients should consider ADR as a viable and often, if not always, preferable alternative to traditional litigation in estate and trust disputes.
[1] Miss. Code Ann. § 91-8-1004(c)
[2] Id.
[3] East Ford, Inc. v. Taylor, 826 So.2d 709, 711 (Miss. 2002).
[4] Williams v. Williams, 185 Miss. 53, 187 So. 209 (1939).
[5] Id. at 213.
[6] Id.
[7] Miss. Code Ann. § 91-8-203
[8] Miss. Code Ann. § 91-8-1004(c).
[9] As defined in Miss. Code Ann. § 91-8-103(21).
[10] Miss. Code Ann. § 91-8-111(a).
[11] Miss. Code Ann. § 91-8-111(c).
[12] Miss. Code Ann. § 91-8-111(b).
[13] Miss. Code Ann. § 91-8-111(d).
[14] Miss. Code Ann. § 91-8-1004(c)
