Trust Arbitration Clause is Binding on Beneficiary

The trustee delegated his investment authority to an advisor pursuant to state law.  The agreement contained a provision requiring arbitration of all claims and disputes.  In a voluntary accounting proceeding, the trust’s beneficiary contended that she is not bound by the arbitration clause.  The court in In re Blumenkrantz, 824 N.Y.S.2d 884 (Sur. Ct. Nassau Co. 2006), held that if the state law requirement that a delegee submit to the jurisdiction of the state’s courts requires a judicial determination of disputes, it is preempted by the Federal Arbitration Act and that the beneficiary is bound by the arbitration agreement.  If the trustee has a conflict of interest, the beneficiary may receive letters of limited trusteeship to represent the trust in the arbitration proceeding.