I have written previously that arbitration clauses in trust are enforceable against the beneficiaries. Normally, arbitration clauses are not enforceable against someone unless they agreed to be bound by arbitration. In the trust context, the Supreme Court has held that if a trust contains an arbitration clause and you receive benefits from the trust, you are agreeing to the arbitration clause. This is called direct-benefits estoppel. I said in that article that the same rule would probably apply to an arbitration clause in a will. Well, there is a case now involving an arbitration clause in a will.
In the will case, the Testator’s will contained a provision requiring arbitration of all disputes. 14-18-00003-CV. The Successor Administrator sued the Former Executor for several alleged breaches of fiduciary duty. Former Executor moved to compel arbitration. The trial court denied the motion and Former Executor appealed.
The appeals court also denied arbitration. They said that direct-benefits estoppel did not apply because the Former Executor did not receive benefits. The Former Executor claimed that the fees that the he received were benefits under the will so the arbitration clause required arbitration. The court explained that Successor Administrator’s claims are not based on allegations that Former Executor violated the terms of the will. Instead, the breach of fiduciary duty claims against Former Executor were derived from statutes and common law, irrespective of the will itself. In addition, Successor Administrator’s entitlement to fees is based on Texas Estates Code § 352.051, not the will.
So, the implication is that arbitration clauses in wills are enforceable under the right circumstances.
Note: A 2019 case denied an interlocutory appeal of an order to arbitrate. A party sued a trust company for inappropriately distributing funds. The trust company demanded arbitration which the trial court ordered. The party that did no want arbitration attempted an interlocutory appeal. The appeals court denied the appeal saying that only orders denying arbitration are subject to interlocutory appeals, not orders granting arbitration. 11-19-00017-CV.
