Did you know that the Federal Arbitration Act in 1925 did not include enforcement of a mandatory arbitration clause in a will or trust document because, generally, arbitration clauses must be agreed to in writing by both parties, as in a contract? Usually, a person makes her or his own will or trust, and the heirs or beneficiaries, executor, and/or trustee are not party to that document. Thus, they have not agreed to binding arbitration even if such a clause is included in the document by the person who is creating the will or trust. Nonetheless, mandatory arbitration agreements in wills and trusts are becoming more common.
In recent years, courts have differed on whether arbitration clauses in wills and trusts can be enforced to settle disputes between beneficiaries. Proponents of enforcing arbitration clauses in wills and trusts emphasize that enforcement can prevent arguments among family members by having a prompt and final process to resolve disputes, and avoids lengthy and expensive litigation. They also point to the inability of probate judges to deal with sensitive personal issues while balancing heavy caseloads. Opponents emphasize that arbitration is a process that requires consent and that beneficiaries have not consented. There may also be a concern that an executor or trustee could be constantly taken to arbitration, slowing down the distribution process.
Estate and trust laws differ between states which means the enforceability of arbitration clauses in wills and estates varies depending upon the particular arbitration statute in each state. Florida law, for example, allows for binding arbitration to be imposed in a will or trust document on disputes that do not involve challenges to the validity of the will or trust “between or among the beneficiaries and a fiduciary under the will or trust, or any combination of such.” Meanwhile, Arizona law allows for enforcement of arbitration in wills and trusts with regard to “administration or distribution of the will or trust.” Washington State has an entire chapter of laws dedicated to Trust and Estate Dispute Resolution.
Before including an arbitration clause in your will or trust, talk to a knowledgeable estates and trusts attorney. Our office is available to assist with this and related legal matters. Reach out to our office today to schedule an appointment.