"Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, expenses and waste of time. "
Lincoln’s words are doubly true today. Our society is beset with litigation – and all too often, there are no winners, except, perhaps, the lawyers. People need alternative means for resolving disputes.
Mediation, as a means of dispute resolution, is widely used in divorce and child custody disputes, and is becoming more common in general civil litigation matters. There is a growing interest in using mediation to solve disputes related to wills and trusts.
In mediation an experienced neutral party attempts to assist the parties to air their concerns, understand each other’s point of view, and find a common ground. No decision is rendered; the mediator facilitates the parties’ arriving at their own solution.
Both litigation and arbitration seek a winner and a loser and are adversarial procedures – usually further alienating the parties from each other . Many professionals believe that only through mediation is it possible to resolve the dispute and at the same time achieve reconciliation – restoring and improving the relations between the parties. Because of the possibility of reconciliation, mediation is an excellent approach for family disputes including disputes over estates and inheritances.
A mediator is not a therapist and does not act like one. But a mediator can provide for an airing of differences before they reach critical mass for an explosion. While there is no technical legal requirement that a mediator be a lawyer, considering the complex property law and tax issues presented in the trust and estates field, it seems to me that an effective mediator would almost have to be lawyer. The mediator must be able to assess the relative strengths and weaknesses of the parties’ arguments and must be completely independent with respect to all the parties.
Mediation in Estate Settlement
The death of a family member often sets the stage for conflict within the family. As John Gromala and David Gage point out in the November 2000 issue of Trusts and Estates: “Where estates are concerned, intricacies of fact and law can combine with emotion, misperceptions, and complicated family dynamics to form a highly combustible mixture. Mediation can put out the fires before they consume both money and family harmony.”
The traditional method of settling disputes that arise in estate administration is the litigation process from the formal pleading and response, trial and appeal. This can be extremely time-consuming and astonishingly expensive. As a result of the litigation process, family relationships can be left in tatters or completely destroyed. Not only is the inheritance consumed by fees, but the family is consumed by anger and hatred.
While widely used in divorce and child custody disputes, few jurisdictions look to mediation in disputes involving wills and trusts. The time has come to give these disputants the same chance at resolving issues and maintaining family relationships. There is nothing to stop disputants from seeking mediation privately. Parties to any dispute can seek mediation. Lawyers need to be alerted to the possibility of seeking this kind of resolution and trained away from the immediate reaction of pursuing claims in court. (A friend remarked that it takes 10 times longer to train a lawyer to be a mediator than to train anyone else; the adversarial approach must be unlearned.)
In mediation the parties control the process, and there is no risk of an adverse decision, since the mediator does not render a decision or judgment. Nothing said during the mediation can be used as evidence later at trial. The process is completely confidential and solutions can be arrived at that could not be ordered by the court as legal or equitable remedies – for example, an opportunity to air grievances or receive an apology.
Mediation in Trustee-Beneficiary Disputes
Who has not heard beneficiaries complaining about trustees? Often beneficiaries are critical of the trustee’s investments, the trustee’s exercise (or non-exercise) of its discretionary powers, the Trustee’s unresponsiveness. Often the beneficiary does not understand the restrictions on the trustee’s actions, and the trustee fails miserably to communicate effectively. The Trustee- Beneficiary relationship can begin to resemble the caricature presented in the old TV sitcom starring Lucille Ball as Lucy Carmichael who is always conniving against Mr. Mooney (Gale Gordon), the trust officer who administered her deceased husband’s trust for her.
Many disputes of this nature can be solved by mediation before the parties become polarized in litigation. When the trustee’s exercise of discretion is involved, mediation is the best answer. Seldom can a trustee be forced to exercise discretion and seldom can a beneficiary be reconciled to a steady diet of “no” from the trustee for every request.
Mediation in Estate Planning
Estate planning aims at the transfer of wealth from one generation to another in a way which minimizes taxes and maximizes economic gain. At bottom, it usually involves parents making gifts to their children, grandchildren or charities. The problem is that while many clients spend hours with attorneys, accountants and financial advisors crafting an estate plan, they spend no time with their intended beneficiaries explaining what they have done and why. After Mom and Dad are gone, the family acrimony begins – brother sues brother and sisters stop talking to one another for years.
Since your typical (dysfunctional) family has trouble communicating about day to day activities such as what to have for dinner; perhaps, it is no surprise that the typical family cannot and does not communicate about dying, property division, and settling estates. Nevertheless, communicating the plan and addressing the issues before death is the best gift that can be given to beneficiaries.
It is not bad manners to talk about the estate plan, and it will not make matters worse. What makes matters worse is leaving the children to fight it out after Mom and Dad are both gone. If Mom and Dad are afraid to tell the kids what they’ve done in their estate plan, they are leaving a legacy of acrimony. A mediator will recognize that it is up to Mom and Dad what they do with their assets and that they want all family members to feel as good as possible about the estate plan and not feel cheated or disappointed. Bringing all the parties together can ensure that hidden agendas are brought out into the open, get the most buy-in from the parties and get the best protection against the plan being contested.
Mom and Dad need to be shown that spending some time and money now on a process of mediation can save thousands of dollars later and, more importantly, can preserve family relationships that are more precious than money.
Mediation is not family therapy. It is a short-term process aimed at resolving a dispute while attempting to preserve family relationships. It depends on opening lines of communication and coming up with solutions.
Mediation can also be used to discuss long term care issues with parents, to determine how siblings can equitably share the responsibility of helping aging parents, and how to deal with care givers and medical personnel. Disputed guardianships are perfect for mediation – nothing is worse than the public airing of dirty linen that a contested guardianship hearing brings out.
As far as the estate planning documents themselves go, it is entirely possible to include provisions that require the parties to submit disputes to private mediation rather than resort to the courts. Many texts point out that George Washington’s will contained such a provision:
“That all disputes (if unhappily they should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chose by the disputants each having the choice of one, and the third by those two – which three men thus chosen shall, unfettered by law or legal construction, declare their sense of the Testator’s intention; and such decision is, to all intents and purposes, to be as binding as if it had been given in the Supreme Court of the United States.”
Much is at risk in estate planning, and the most important is not estate taxes. The most important factors are the beneficiaries, their lives and their relationships – in other words, family.