Quick Summary

Here’s a summary of an important estate-planning lesson involving trusts, arbitration, and real estate transfers.  The case is In re Mitchell N. Bunker and Linda K. Bunker Trust, and it was decided by the Michigan Court of Appeals two days ago.

The court confirmed that when a trust requires disputes to be resolved through arbitration, courts will usually not second-guess the arbitrator’s decision. The case also shows how improperly prepared deeds can create unintended consequences, especially when trust-owned property is involved.

Why This Matters

Arbitration is a private decision-making process written into some trusts that requires disputes to be resolved outside of court.

In this case, a family dispute arose over real estate that had been owned by a trust. Some deeds were prepared that appeared to transfer property out of the trust before the owner died.

The disagreement was not ultimately decided by a judge.

Instead, the trust required the dispute to go through binding arbitration, and the arbitrator concluded that the deeds were not valid transfers of the trust property.

The court later confirmed the arbitration decision, and the Michigan Court of Appeals upheld that result.

The key point is this:  Once arbitration is required by a trust and properly conducted, courts typically do not re-decide the facts or substitute their judgment, even if someone disagrees with the outcome.

That made the arbitrator’s decision effectively final.

The underlying issue involved trust-owned real estate and improperly executed deeds. In short, the deeds were signed by the individual when the property was owned by the trust.

For example, if John Smith owns the property, the deed should say “John Smith hereby deeds the property to. . .”

But if John Smith’s trust owns the property, the deed should say “John Smith, Trustee of the John Smith Trust dated January 2, 2015 hereby deeds the property to. . .”

Because the owner signed individually instead of on behalf of the trust, the attempted deeds did not work the way the parties expected.

Situations like this happen more often than people realize. Families sometimes try to prepare deeds themselves or make quick changes to property ownership without coordinating those changes with the trust or estate plan.

Unfortunately, real estate transfers are one of those areas where small technical mistakes can completely change the outcome.

What someone intended to happen may not be what legally happens.

And once a dispute reaches arbitration, it may be very difficult to undo the result.

Simple Lesson

Trying to fix property ownership without proper guidance can create permanent and unintended results.  And if your trust contains an arbitration provision, it will generally be binding on your beneficiaries.

Action Step

If you are thinking about transferring real estate — especially property connected to a trust — talk with your estate planning attorney first to make sure the transfer works the way you intend.

Also, lots of people think that trusts and wills are “just boilerplate” language.  They are not, and understanding how your estate plan works matters.

If you’d like to talk about your estate plan or real estate issues, we’re always happy to help.
Call us at (517) 548-7400 or reach out here: https://www.michiganestateplans.com/contact-us