Keeping Trust Disputes Out of Court
Litigation is expensive, time-consuming, and public. Arizona's trust code recognizes that many families would prefer to resolve disagreements privately and efficiently. This statute gives the person creating the trust the ability to require alternative dispute resolution, such as mediation or arbitration, for issues that arise during trust administration or distribution.
A trust instrument may provide mandatory, exclusive and reasonable procedures to resolve issues between the trustee and interested persons or among interested persons with regard to the administration or distribution of the trust.
A.R.S. § 14-10205The key word here is "mandatory." If the trust document includes a properly drafted ADR clause, the parties generally cannot skip it and go straight to court. The clause can require mediation, binding arbitration, or another resolution process as the exclusive method for handling disputes.
What Makes an ADR Clause Enforceable
The statute requires the procedures to be "reasonable." A trust cannot include a dispute resolution process that is so one-sided or burdensome that it effectively denies a beneficiary any meaningful remedy. Courts retain the authority to evaluate whether the procedures meet that standard.
For families creating a trust, this is worth considering carefully. An ADR clause can reduce legal costs, keep disputes private, and speed up resolution. It can also prevent one beneficiary from tying up trust assets in prolonged litigation. Partner attorneys can help craft language that balances efficiency with fairness, ensuring the clause holds up if it is ever tested.
