Restricting Testamentary Freedom: Ex Ante Versus Ex Post Considerations

Abstract:     
To what extent should the law facilitate the wishes of the dead over the lives of the living? Certain innovations in trust law, including the rise of "perpetual" trusts, seem to entail excessive control by the dead hand. Yet, other reforms and trends, including laws pertaining to conditional bequests and the modification and termination of trusts, deemphasize donative intent and limit a donor's freedom of disposition. In this Article, I reexamine the justifications for restricting testamentary freedom. Building on insights from economic analysis of law, the Article offers a theoretical framework for evaluating judicial intervention to alter wills, trusts, and other gratuitous transfers at death. Effectuating the ex ante interests of a donor is not coextensive with maximizing social welfare, and judicial modification or interpretation may be necessary as a result of divergences between private and social valuations, negative externalities, and unforeseen as well as unprovided-for contingencies. But disregarding donative intent can be problematic, even if a donor is dead or beneficiaries may benefit. Such intervention may affect the structure and timing of gifts, the level of care of attorneys, and the expected costs of litigation, in addition to a donor's satisfaction and incentive to accumulate property during life. While there are legitimate reasons for potentially restricting testamentary freedom, maximizing the interests of donees ex post is not a sufficient condition for justifying intervention, as doing so may alter the incentives of a donor ex ante. Indeed, donees may themselves benefit as a group if courts refrain from intervening on their behalf in particular cases. After exploring several applications in succession law, I examine possible explanations, based on hindsight bias and public choice theory, for the persistence of the ex post perspective.

Number of Pages in PDF File: 60

Keywords: testamentary freedom, dead hand, social welfare, ex ante, ex post, property, bequests, trusts, probate, succession law

JEL Classification: K11

working papers series