Article on Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts

Steven D. Baker recently published an Article entitled, Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts, 9 Est. Plan. & Community Prop. L.J. 191 (2017). Provided below is an abstract of the Article:

With the recent decision in Rachal v. Reitz, the Supreme Court of Texas enforced a trust provision requiring binding arbitration of disputes between a trustee and a beneficiary, joining Florida and Arizona in explicitly recognizing the validity of such clauses. Settlors and testators who seek to minimize the delays and costs of potential conflict between beneficiaries will enjoy the favorable decision. But while the Rachal court answered, at least in part, the question of whether the settlor of a Texas trust can impose arbitration on the trustee and beneficiaries, the conscientious estate planning practitioner must also consider whether a client should do so in its will and trust instruments.

Accordingly, the first part of this article discusses the advantages and disadvantages of arbitration—a vehicle for avoiding litigation developed for the commercial world—in the realm of settling trust controversies. The second part of this article considers the impact of the Rachal opinion, as well as statutes in other jurisdictions that have recognized the use of such provisions. The third part addresses the particular limitations of mandatory arbitration in the context of resolving trust disputes. And the last part discusses the implementation of trust arbitration, both in terms of the summarizing the procedures set forth in the Texas Arbitration Act (TAA) and the drafting of the clause itself.