Estate Planning: Protecting from the Grave

While "dead-hand control" may sound like a macabre approach to estate planning, placing conditions on the distribution of your assets can be an appropriate way to incentivize your beneficiaries to pursue worthy achievements.

It's not uncommon for the maker of a will or trust to place on an heir or beneficiary certain conditions that must be met before they can receive an inheritance or property transfer. While the most common and arguably prudent condition is reaching a certain age, we also prepare estate plans that reward beneficiaries for achieving certain positive goals, such as earning a college degree.

Because these events may occur after the testator or trustor has passed away, the term "dead-hand control" is often used to describe a situation where people try to influence their heirs' behavior from the grave. It isn't as sinister as it sounds; if a conditional inheritance causes an heir to behave in a manner that aligns with societal norms or family standards, become better educated, or follow through on worthwhile commitments, dead-hand control can be a good thing.

In other words, what sounds like "ruling from the grave" is more like protecting from the grave - using estate planning to preserve family wealth or perpetuate family values that you want to reinforce or protect, e.g., academic achievement, leading a law-abiding life, or keeping an inheritance safe from creditors or a bad marriage.

Strategies to Consider

First, while in our introduction we gave equal billing to wills and trusts, a will is not the recommended instrument for exercising dead-hand control. For reasons too numerous to discuss here, such control is best achieved through a revocable living trust or, in certain cases, an irrevocable trust.

Second, choosing the right trustee(s) is always crucial, and this situation is no exception. Appoint someone you truly trust and who will be able to serve for the long haul, and give them broad discretion in honoring your intentions and doing the appropriate thing for your beneficiaries.

Third, consider using a "trust protector" as an additional layer of protection. A trust protector can remove a trustee who is not doing a good job - without having to go to court. (See our article, "Should You Name a Trust Protector?")

Fourth, look for ways to avoid fights. Including mediation provisions in your trust, as a precondition to any form of litigation, can reduce a lot of conflicts and avoidable legal costs.

Enforceability

Finally - and this is important - ask for legal guidance regarding the enforceability of the requirements and conditions that you plan to impose. The courts are likely to frown on conditions that are impractical or conflict with the public interest.

For example:

• Requiring that a beneficiary get a college degree will probably stand up in court; requiring that they earn a Ph.D. from MIT will probably not.
• Requiring that they stay out of prison until age 30 will probably be OK; requiring that they avoid getting a speeding ticket before age 25 will probably not.
• Requiring that they register to vote might fly; requiring that they register as (name your favorite political party) probably won't.
• And, while society generally approves of marriage and having children, conditioning an inheritance on marrying by a certain age, to a person of a certain faith or ethnicity, and having X number of children, is an invitation to a court proceeding.