Before Pursuing Arbitration for a Trust Dispute, Weigh the Pros and Cons

After a loved one dies, it is time for the estate plan to be implemented. This may involve the administration of a trust. Unfortunately, disputes can arise among trustees, beneficiaries, and other parties that require resolution. Some trusts may contain either optional or mandatory arbitration clauses. Arbitration is a form of dispute resolution that involves an independent party making a private and judicial decision about the dispute at hand. Before proceeding with arbitration, it is important for trustees to understand the disadvantages associated with the process.

3 Disadvantages of Arbitration During the Trust Administration Process

What are the negative aspects of using arbitration to resolve a trust administration dispute? The following is an overview:

  1. While arbitration is less costly and time consuming in some cases, this is not true for every type of trust dispute. In general, costs associated with probate court matters are less than those associated with other types of disputes. These costs may ultimately prove to be less than the cost of the arbitrator’s hourly rate. In addition, arbitration often takes longer to complete for trust and estate disputes than for other types of issues.
  2. While arbitration offers subject-matter specific forums for many types of issues, there is no alternative dispute forum set up specifically to arbitrate trust and estate-related litigation.
  3. While arbitration may be a possible option, it may not provide the finality that it offers in other types of disputes. This is because there may be uncertainty as to the arbitrator’s jurisdiction over successor trustees and beneficiaries. The successor trustees and the beneficiaries never signed the trust document. Therefore, if they do not agree to submit to arbitration, the advantage of the binding nature of arbitration may be lost. This can create a significant obstacle for the trustees in charge of administering the trust when a decision cannot be relied upon as binding and final.

Determining how best to proceed when a trust dispute arises requires the guidance of an experienced professional. We encourage you to contact us today at (714) 459-5481 for more information.

 

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