An estate plan may seem simple in theory, but disputes between parties cannot always be predicted. Whether it’s fighting beneficiaries or a new trustee, trust disputes are growing more common in Delaware.
Some estate plans include a terrorem clause, which is a no-contest clause designed to prevent anyone from challenging a document by threatening to withhold their inheritance. Going over the details of the plan so that everybody knows what to expect is a way of avoiding the conflict altogether instead of having to fight a legal battle in the wake of the loss of a loved one.
Why is arbitration so common?
Arbitration has grown more commonplace when trust disputes arise largely because it has become more prevalent in all forms of commercial disputes. This is in spite of the fact that trust dispute arbitrations are still the outlier solution for resolving these conflicts. The policy among federal courts to enforce arbitration clauses when included in a contract, the Federal Arbitration Act being the basis for this.
Arbitration has been endorsed by federal law as substitute for settling trust disputes in court. It’s hailed for its increased efficiency and less expensive nature, although resolving trials in this way is still seen as non-traditional. The individual who presides over the arbitration must be highly experienced and knowledgeable in estate planning.
In 2006, the Arbitration Task Force of the American College of Trust and Estate Counsel released a report that made special note of the way federal law endorses arbitration in trust disputes. The reported also included a model legislation, but this has only been adopted by a handful of states, including:
- New Hampshire
- South Dakota
The advantages of arbitration include speeding up the process, eliminating the high costs of legal discovery, and avoiding a situation where potentially personal details about your family are exposed publicly. Arbitration also makes it so these decisions aren’t made by a judge and jury who have little to no understanding of how estate planning works.