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Should you require your beneficiaries to mediate their disputes?

 

The New Hampshire Trust Code allows a trust settlor to mandate that all disputes regarding a trust be resolved through nonjudicial means. Nonjudicial means typically is mediation or an arbitration. On the surface, this is an attractive idea as it seems to avoid the expenses and delays of court litigation.

Binding arbitration is essentially a private adjudication before a hired arbitrator. The rules of evidence are applied by the arbitrator, and he or she makes a legal decision, the same way a judge would in court. There are limited arbitration resources available and few trained and experienced arbitrators in trust and estate matters.

A more common form of nonjudicial dispute resolution is mediation, which if successful results in an agreement. It is impossible to force anyone to make an agreement, and thus a mediation requirement could result in a long-term impasse that is ultimately more costly than court litigation would have been.

The law provides that the nonjudicial dispute resolution requirement be reasonable. Given the circumstances above, limited resources for arbitration and the possibility that forcing parties to agree is found to be unreasonable per se, these requirements may only be appropriate in limited circumstances, where there is some certainty they will be enforced.