From the point of view of estate planning attorneys and financial advisors, it’s questionable to put many qualifiers on beneficiaries before they are entitled to receive their inheritances. In many cases, the testator (will or trust maker) has a sense of distrust, or a concern that unless conditions are imposed, the beneficiary will not spend the inheritance “appropriately”. The short response, in most cases, should be “IDIDC”: I’m dead; I don’t care!
“Dead-hand control” comes into play when someone uses incentives or discouragements in the will or trust to try to control the heirs’ behavior from the grave. Those who opt for controlling from the grave frequently believe that they have been able to affirmatively or negatively influence their upcoming heirs during their lifetime, and consequently think the same is necessary after death. Access to the inheritance may be conditioned on gaining an advanced degree, entering a specific profession, marrying within a certain faith, staying sober, having children or being financially responsible. Estate planners are familiar with many cases where the conditions have backfired, leading to resentment, family divisions and lawsuits. A recent Wall Street Journal article detailed a number of these cases.
However, there may be cases in which careful prior planning is needed to prevent unwanted behavior by a beneficiary: when the testator knows, based on prior behavior, that a beneficiary is a trouble-maker who will make estate or trust administration a nightmare for the fiduciary. A starting point is careful selection of the executor or successor trustee to identify a fiduciary who can deal with the difficult heir. It may be advisable to select a corporate trustee rather than a family member. Second, is to be sure to include a “no-contest” clause which states that anyone who contests the will or trust must win in court or receive no inheritance at all! And then to be sure to leave something to the difficult heir to discourage frivolous lawsuits. Some estate planning attorneys recommend that cases with difficult beneficiaries are best handled through the probate process, so that there is neutral, official supervision to protect the executor from accusations of unfair behavior. Others recommend keeping the process as private as possible to avoid creating opportunities for complaint based on probate notifications. In Virginia, the executor is required to provide notice and copies of filings to the beneficiaries when probate is opened, when the inventory is submitted and when accountings are filed.
The difference between appropriate and questionable prior planning is the intent in the mind of the testator:
- Do I want to influence an heir’s behavior because the heir cannot be counted on to make the right decisions, or
- Do I want to protect my heirs from a trouble-maker?