Rachal v. Reitz; Mandatory Arbitration Agreements.
Historically, according to most states, a mandatory arbitration agreement in a trust or a will is unenforceable. Yet, arbitration can be a great way for families to resolve disputes headed for drawn out estate litigation. Very few states have specific statutes that enforce such clauses; notably, Florida is one of them. Generally, courts find that mandatory arbitration clauses can only be enforced in contracts; wills and trusts aren’t contracts, thus, such clauses have been held unenforceable. Now comes Rachal v. Reitz, under state law, Texas set the stage by enforcing a mandatory arbitration clause in a trust. The Rachal court agreed that a trust is not a contract; however, the Texas Arbitration Act makes the clause enforceable as an “agreement.” The Rachal court held that the term “agreement” should be construed more broadly than the term “contract.” In other words, according to the Rachalcourt, although a trust isn’t a contract, in some cases, a trust represents an agreement and the clauses thereto should be enforced. The take away is that in time, based on states with similar arbitration laws/language, Rachal could set the stage so that mandatory arbitration clauses in wills and trusts become a useful means of preventing/resolving estate litigation. Rachal v. Reitz, N. 11-0708, 2013 WL 1859249, at P. 2 (Texas, May 3, 2013).