What is a Trust and Estate Dispute Resolution Agreement? How is it used in Washington?
When a loved one passes away, disputes over the distribution of assets often arise. Such disputes can lead to a drawn out battle in court. This adds to an already stressful event, strains relationships, and can incur significant costs for all those involved, including the estate or trust. Fortunately, the Trust and Estate Dispute Resolution Act (TEDRA) was designed to help settle disputes outside of the courtroom through mediation, arbitration, and agreement. RCW 11.96A.010.
What is a TEDRA Agreement?
A TEDRA agreement is a legally binding contract governing a dispute between “interested parties” regarding some matter relating to an estate, trust, nonprobate asset, or other asset transferring upon death. RCW 11.96A.220. If filed with the court, the agreement has the effect of a final court order binding all persons interested in the estate or trust. RCW 11.96A.230. Making an agreement is not mandated by the court, but settling disputes through agreement often works for the benefit of all those involved, especially when accounting for the stress, cost, time, and potential damage to relationships associated with taking an issue to trial.
How is a TEDRA agreement used?
In Washington, a TEDRA agreement can be used to settle a wide range of disputes relating to an estate, trust, nonprobate asset, or any other asset transferring upon death. In particular, a TEDRA agreement can settle issues, questions, and disputes involving:
- The construction of wills, trusts, community property agreements, and other writings.
- The existence or validity of a will.
- The competency of the decedent at the time of signing the will.
- Intestate succession when there is no will.
- The classification of individuals as a creditor, heir, or beneficiary.
- Claims of a surviving spouse or child who is not provided for in a will.
- Third-party claims against the estates.
- The validity of transfers of assets before death.
- Matters related to the personal representative or trustee such as fees, accounting, a grant of additional power, fiduciary responsibilities, and a change of personal representative or trustee.
- The situs of a trust.
- An action related to the slayer statute.
RCW 11.96A.030; RCW 11.96A.220.
Should you seek counsel when making a TEDRA Agreement?
Although TEDRA agreements do not require legal counsel, legal assistance is recommended for the following reasons:
1. TEDRA agreements have specific requirements that must be followed. A TEDRA agreement is binding only if all “interested persons” are signatories of the agreement and the agreement adequately represents and protects the interests of the signatories. RCW 11.96A.220; RCW 11.96A.240. Interested persons can include trustors, trustees, personal representatives, heirs, beneficiaries, guardians, creditors, and owners of a nonprobate asset. RCW 11.96A.030(5). Determining who must be a party to the agreement can be difficult and the consequences of failing to include all “interested persons” is severe: the interested person not a party to the agreement is not bound by its provisions. See, e.g., In re Estate of Kuest, 158 Wn.App. 1007 (2010).
2. The provisions are binding. Subject to the previous requirements, when you sign a TEDRA agreement, you will be bound by the provisions contained therein. RCW 11.96A.220. Often, such agreements are complex and difficult to understand, and even simple provisions can have unintended consequences. Failure to understand the full implications of the provisions can negatively impact your interests and leave you with little or no recourse. This concern is multiplied when the other parties have legal representation in drafting the agreement.
3. What is not in the agreement can hurt you. Including all the necessary provisions to protect your interest can be an onerous task and failing to take into account a minor detail can turn into a major problem and more litigation. The risk of leaving out small details or failing to plan for future disputes is exacerbated when parties are emotionally involved in a family dispute, making it difficult to focus on both the “big picture” and the details that may be included in a well-drafted agreement. Such potential exclusions include failure to (i) appropriate tax obligations, (ii) plan for contingencies, or (iii) provide for means of settling future disputes, such as an arbitration clause.
4. There are additional concerns beyond the substance of the TEDRA agreement. For example, TEDRA agreements can be filed with the court. RCW 11.96A.230. When filed, the agreement has the same status as a final court order. Id. having a final court order (1) grants the court power to compel compliance without having to file a separate action and (2) is required for the IRS to recognize the agreement, which is important when the agreement has tax implications. Id. Filing the agreement also has a potential downside: the agreement is public record. Failing to take this into account can have serious personal consequences if the agreement contains damaging information. To avoid this, a memorandum summarizing the agreement can be filed instead of the complete agreement. Id.
Legal training, an outside perspective, and negotiation skills place attorneys in a superior position to account for and address the many issues surrounding a TEDRA agreement. This advantage can help you secure a favorable TEDRA agreement and prevent future litigation. The attorneys at Wolff, Hislop & Crockett have many years of experience regarding TEDRA agreements and related matters and can help protect your interests. Contact us today for a consultation.