You’ve probably heard of people including no-contest clauses in their wills and trusts. A no-contest clause is language that’s included in an estate planning document providing that any heir or beneficiary who unsuccessfully challenges the will or trust will lose their inheritance altogether.
However, have you heard of including a mandatory arbitration clause in your trust? This is language that’s included in your trust requiring any disputes to be resolved through arbitration, instead of being decided in court.
What is arbitration?
In arbitration, a dispute is resolved by a neutral third party called an arbitrator. A hearing is held at which all parties have a chance to present their side of the dispute, and then the arbitrator makes a decision. The process is generally quicker and less expensive than going to court to have a dispute resolved. Plus, if binding arbitration is selected, the arbitrator has the final word on the matter – the decision can’t be appealed, and the dispute can’t be re-litigated in court.
Why use a mandatory arbitration clause?
When it comes to trust disputes, arbitration offers a number of advantages. It is usually less expensive than having a court resolve a disagreement – this means that more of your trust assets are preserved for your beneficiaries, rather than being spent on attorney’s fees and court costs. Plus, avoiding court means that the terms of your trust remain private. And, the fact that arbitration is generally quicker than litigation means less strain on your trustee, your beneficiaries, and everyone else involved.
If you are concerned about the possibility of estate litigation, be sure to talk to your estate planning attorney. He or she can suggest a number of safeguards to help keep the peace, or at least minimize the impact an estate dispute has on your beneficiaries and their inheritances.