The Winter 2024 issue of the Michigan Probate & Estate Planning Journal includes an article by Fausone & Grysko attorney Kurt A. Olson:

Historically the Michigan Courts have been reticent to recognize binding arbitration agreements entered into post death by fiduciaries engaged in the administration of probate estates. Some of these cases are discussed below. There are no reported cases, however, addressing whether an arbitration clause in a will is valid and enforceable.

In In re Meredith Estate,1 the Michigan Supreme Court upheld a circuit court order that dismissed an appeal from the probate court’s denial to not allow the probate of a codicil to the decedent’s will. The case is procedurally unusual but the ultimate result is that the Supreme Court refused to enter an arbitration award with a finding of testamentary incapacity. The agreement for arbitration was reached between the executor of a will and the executor of a codicil relative to the same decedent and was reached in open court. The executor (now personal representative) proposing the submission of the codicil was added as co-executor by the codicil and that was the main issue of the case.

The case had been submitted informally by the executors to an independent attorney who acted as sole arbitrator in making the determination that the decedent lacked testamentary capacity to execute the codicil and accordingly, the codicil should not be admitted for probate.

In addressing the issue of whether the arbitration finding of testamentary incapacity could be enforced, the Meredith court recognized that the agreement to arbitrate was informal, there was no prior agreement whether the arbitration was binding, and it was only between the executors of the will and codicil and did not involve the ultimate pecuniary devisees. Additionally, no witnesses were called and sworn during the arbitration; they were only interviewed by the arbitrator.

The court went so far as to state in dicta that probate disputes regarding testamentary capacity could not be arbitrated as the statutes at the time granted the probate court the sole authority to pass upon the testamentary capacity of the testator and thus, any arbitration agreement would divest the court of its jurisdiction. This is still the state of the law in Michigan although there may be some who would argue it has been superseded based on In re Nestorovski Estate.2

In Nestorovski, the Court of Appeals may have opened the door to the possibility of an arbitration clause in a will being recognized as enforceable. In Nestorovski, claims of incapacity and undue influence were addressed by an arbitrator and the findings were recognized and enforced. After participating in a three-day long arbitration, the aggrieved party filed objections to the enforceability of the arbitration finding based on Meredith and the claim that the probate court did not have jurisdiction to recognize and enforce the award.

While the Nestorovski court did not, and cannot, overrule Meredith, it successfully distinguished the case from Meredith by pointing out that the agreement for binding arbitration in Nestorovski was decided beforehand, the hearing in Nestorovski was not informal as there was sworn testimony of witnesses under oath, and the pecuniary parties in Nestorovski participated in the hearing. In contrast, the parties in Meredith never agreed that the arbitration was to be binding beforehand, witnesses were interviewed but there was no sworn testimony, and only the two executors and their representatives participated in the informal hearing, not any pecuniary parties.

Further, the Nestorovski court determined since the Meredith holding only dealt with the narrow issue of enforceability of the agreement infront of it, the analysis that common law arbitration clauses in probate are not enforceable was only dicta. The Nestorovski court rightly pointed out that Meredith was decided under statutory law as it existed in 1929. With the passage of EPIC and the encouragement of alternative dispute resolution set forth in MCR 2.410 as incorporated in MCR 5.143(A), the probate court had the jurisdiction to enforce the arbitration award. Public policy also seems to favor alternative dispute resolution.

Since Nestorovski involves a post death agreement, it does not address the issue of enforceability of an arbitration clause in a will. But, importantly, it does indicate that such common law arbitration agreements do not deprive probate courts of jurisdiction.

Although common law arbitration is based on agreement between the parties and the insertion of an arbitration clause by the testator is one sided and not based on agreement, it would seem that since the intent of EPIC as stated in MCL 700.1201(b) is “[t]o discover and make effective a decedent’s intent in distribution of the decedent’s property”, a properly drafted arbitration clause in a will with the procedural “safeguards” set forth in Nestorovski may possibly be enforced. (For ideas of what might be helpful in this regard, the reader might wish to read Rooyaker & Sitz, PLLC v Plante & Moran, PLLC,3 which addresses circuit court jurisdiction not being pre-empted by arbitration provisions, and which analysis was adopted and also applied to probate court jurisdiction by the Nestorovski court).

In summary, while the enforceability of an arbitration clause in a will has not been determined, it would seem that the inclusion of such a clause at the testator’s direction would not run afoul of public policy, and it would serve as direction to the probate court that since alternative dispute resolution is now favored by the courts that arbitration should be considered as an alternative dispute mechanism even absent any post death agreements. At worst, the clause would be set aside as unenforceable. Of course, this fact should be explained to the testator. Accordingly, there really seems to be no downside to such a clause and an increasing likelihood that it would be enforced.

Notes

1. In re Meredith’s Estate, 275 Mich 278, 266 NW 351 (1936).
2. In re Nestorovski Estate, 283 Mich App 177, 769 NW2d 720 (2009).
3. Rooyakker & Sitz, PLLC v Plante & Moran, PLLC,
   276 Mich App 146, 742 NW2d 409 (2007).

About the Author

Kurt A. Olson is an attorney at Fausone and Grysko, PLC in Northville, MI. Kurt’s practice concentrates on estate planning, administration, incapacity planning and the related litigation in those areas. In his lengthy career, he has tried numerous cases including high profile matters in these areas as well as several other areas. Kurt also served on the Probate Council for six years and chaired the Unauthorized Practice of Law committee.