Keeping Trust Disputes Out of Court
Litigation is expensive, slow, and public. The trust code lets the person creating the trust require dispute resolution outside of court. For example, they can require mediation or arbitration for issues that arise during 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 is "mandatory." If the trust includes a properly drafted ADR clause, the parties generally cannot skip it. The clause can require mediation, binding arbitration, or another process as the only way to handle disputes.
What Makes an ADR Clause Enforceable
The statute requires the steps to be "reasonable." A trust cannot use a process so one-sided that it blocks a beneficiary from any real remedy. Courts keep the power to review whether the steps meet that standard.
This differs from business disputes, where arbitration clauses are common. In the trust context, the trustee's fiduciary duties add complexity. The ADR process must still let beneficiaries hold the trustee accountable.
For families creating a trust, this is worth careful thought. An ADR clause can cut costs, keep disputes private, and speed things up. It can also stop one beneficiary from tying up trust assets in long court battles. An attorney can help draft language that balances fairness with efficiency.