What is an arbitration clause
The Supreme Court of Texas upheld an arbitration clause in a trust and the same reasoning may apply to wills although the court has not ruled on this question where a will was involved. Arbitration clauses are usually found in contracts or other agreements. The parties agree to arbitrate. Disputes are submitted to an arbitrator instead of being tried by a court in a lawsuit. There are perceived cost savings with arbitration and arbitration can be quicker than normal litigation. One of the main benefits of arbitration is privacy. Litigation is public, arbitration is private.
Even though the beneficiaries did not agree to arbitration, the Supreme Court held that, by accepting benefits under the trust, they had agreed to the arbitration clause in the trust. 11-0708.
Arbitration clauses in wills
A testator may not want the world to know about his estate and may prefer that all disputes be settled by arbitration. In the context of a trust, the court held that an arbitration clause was enforceable against a beneficiary who tried to sue a trustee for an accounting. The beneficiary alleged that the arbitration clause was not enforceable against him because he had never agreed to arbitration and arbitration clauses require an agreement of the parties. The court said that because the beneficiary accepted benefits under the trust he assented to the arbitration clause (direct benefits estoppel.) The beneficiary was also trying to enforce the trust which is another indication that he assented to the trust’s terms. Because the same reasoning can be applied to a beneficiary who accepts benefits under the will or tries to enforce its terms, the court may at a future date uphold an arbitration clause in a will if it is asked to decide that question.
Contesting a will
Arbitration does not apply to contesting a will because the will contest is alleging that the will is not the will of the testator because the testator was mentally incompetent to make a will or someone was exercising undue influence over him or for some other reason. If the will contest is successful, the will is thrown out. Any arbitration clause does not exist because there is no will.
