Are Arbitration Clauses in Trusts Enforceable?
Texas Supreme Court Addresses Arbitration Clauses in Trusts
Andrew Francis Reitz established the A.F. Reitz Trust in 2000, and named his sons, James and John, as sole beneficiaries and himself as trustee. Included in the trust was an arbitration provision that specified Andrew's desire to resolve any disputes involving the trust be resolved through arbitration. Hal Rachal, Jr, the attorney who drafted the trust, became the successor trustee upon Andrew's death.
In 2009, John Reitz sued Rachal, alleging misappropriation of trust assets and failure to provide an accounting to the beneficiaries. In addition to a temporary injunction and damages, Reitz also wanted Rachal to be removed as trustee.
Texas Arbitration Act
Rachal's attempt to have the case settled through the arbitration clause in the trust was denied by trial court and appellate court. However, the Texas Supreme Court reversed these decisions, finding that under the Texas Arbitration Act (TAA), an arbitration provision in an inter vivos trust is enforceable against the beneficiaries.
If you are considering inserting an arbitration clause into your will, consult experienced estate planning attorneys first to be sure the language in the document meets the standard to be enforceable in the state of Texas. Our experienced probate attorneys explain trust options, fiduciary duties and the trust administration and probate process in Texas. Contact an experienced Bryan, Texas estate planning attorney at the Peterson Law Group today at 979-703-7014, or visit us online.