Dead Hand Control: Conditional Bequests and Devisements

Some have quoted the Golden Rule as "he who has the gold makes the rules"—whether alive or dead, evidently. Dead hand control is conditioning a bequest or devisement to a beneficiary, such that they will only receive the gift if they abide by the conditions of the gift. Sometimes it is to protect the beneficiaries from their own bad behavior or financial mismanagement. Often it is to promote a family lifestyle or to incentivize the beneficiaries to work, or to prevent them from becoming profligate or lazy. Dead hand control can also be achieved through the use of trusts. Trusts that were set up to motivate the beneficiaries are sometimes referred to as incentive trusts.

Some examples of dead hand control include the parents of an alcoholic who tied his inheritance to his sobriety. Another linked an inheritance to the gross income of a beneficiary as revealed on his W-2 form. Another grantor set up a trust that gave the trustee the discretion to only give the money to the beneficiaries when they had sufficient wisdom and character to use it wisely.

So if the condition is fulfilled, how does the personal representative or trustee determine that it was fulfilled? They simply demand to see account records, medical files, school records, employment history, or any other evidence that may be required to show that the beneficiary fulfilled the condition. If the beneficiary does not supply the requested documents or other information, then the beneficiary does not get the money. If there is no one to monitor the conditional gift, then the court may appoint someone—at the expense of the estate, of course.

Why Allow Dead Hand Control?

Since it is the benefactors who have the right to give, but the beneficiaries have no right to receive, the benefactors can stipulate any conditions to the gift, whether the gift is given in person, by will, or by trust.

The law generally gives the greatest latitude to the donor in allowing conditions. Indeed, the Restatement (Third) of Property: Wills and Other Donative Transfers (2003) favors the donor's freedom to the maximum extent allowed by law, but considers a donor's condition to be invalid where it contradicts public policy.

The purpose of probate is to facilitate the transfer of the decedent's property to his beneficiaries, not to regulate the process. Hence, the courts do not try to determine if the condition is fair or wise, only to ensure that the donor's intention is carried out as best as possible.

Dead Hand Control May Not Achieve Objectives

Although it is natural to allow the donor to condition a gift, there are, nonetheless, disadvantages to doing so.

Dead hand control often doesn't work as intended, especially when it seeks to make better people out of the beneficiaries, who are usually children of the decedent. If children do not develop good habits or morals while they are young, it is unlikely that dead hand control will change their ways. Hence, it would behoove parents to instill these qualities in their children while they are growing up, when they would be most tractable.

Furthermore, it is difficult to foresee all of the possibilities resulting from the conditions. The decedent cannot respond to changes and it is difficult to set up conditions that the living cannot circumvent. For instance, a trust was set up for Tommy Manville, an heir of the Johns-Manville fortune that stipulated that he would receive $250,000 when he married. So he got married, collected the money, paid the woman $50,000, then got a quick divorce. When he needed more money, he would get married again, using the same game plan—a total of 13 times according to this article: Ideas & Trends: The Rise of Incentive Trusts; Six Feet Under and Overbearing - NYTimes.com.

And sometimes dead hand control simply doesn't work. According to this article, Where there's a will there's a whim, McNair Ilgrenfritz, a wealthy American music-lover and composer, left a conditional gift of $125,000 to the New York Metropolitan Opera if they would stage one of his operas; they declined even though they thought his opera was competent. Of course, this underscores another tacit requirement of conditional gifts—the gift has to be significant to the beneficiary to be motivational—$125,000 is probably small change to the New York Metropolitan Opera.

Dead Hand Control Provisions May Be Unenforceable If They Violate Public Policy

The law will not enforce any condition where the condition violates public policy. A donor, while still alive, can condition a gift even if it violates public policy, simply because she can decide to give it or not, depending on whether beneficiary has complied with the condition.

However, conditional gifts, dispensed by a trust or will, will not be enforced if it violates public policy, since the decedent has no more say in the matter and the decedent does not suffer any consequences of a condition.

Some of the following conditions have been consistently considered against public policy:

Restraints on marriage. Conditions that the beneficiary never marries, or to marry or not marry a spouse of a particular race are held to be void.

Partial restraints, such as requiring the beneficiary to marry within a specified time or that the spouse be of a particular religion, are generally held to be valid. However, the courts will consider the age of the beneficiary and the time period for the condition.

For instance, in Shapira v. Union National Bank, 315 N.E. 2d 825 (Ohio 1974), a requirement that the father imposed on his sons to marry within 7 years of his death to Jewish girls, where both parents of the girls were also Jewish, before they could receive their testamentary gift was held to be valid.

Provisions promoting divorce or family strife. Any conditions where the intention is to promote family strife, including divorce, are held to be invalid. However, a gift's condition on the separation or divorce of the beneficiary is considered valid if it was the testator's intent to provide support. If the intent was to encourage divorce, then it is considered void.

Religion. Requirements to practice a certain religion are considered void because it violates the Constitutional right to religious freedom.

Property destruction. Directives to destroy property are held to be invalid, since the destruction would only lessen the wealth of the living and incur economic costs on society. While anyone can destroy his own property, he incurs the cost himself. But the dead suffer no consequences, so any directives for the postmortem destruction of property are unenforceable.

Illegal activity. Any provisions that promote illegal activity or that hinder the efforts of creditors are also unenforceable.

Unreasonable or uncertifiable conditions. A condition must be both certifiable and reasonable. For instance, a requirement to marry someone nice is not a condition that is certifiable. But whether a condition is reasonably or certifiable is a factual issue to be determined.

Remedy for Invalid Will Directives

What happens to a gift that was subject to an invalid condition depends on whether there was a gift-over clause in the will that directs the gift to another beneficiary in the event that the primary beneficiary does not receive it. If there is a gift-over clause, then the gift will go to the gift-over beneficiary, not to the beneficiary who violated the condition, even if the condition is against public policy. If there is no gift-over clause, then the beneficiary receives the gift free and clear of the condition.

Dead Hand Control Reduces Allocative Efficiency

A major drawback of dead hand control for society, especially for large estates, is the inefficient allocation of economic resources. Allocative efficiency is the production of the most desirable goods in the desired quantities. However, only the living have desires. The dead have no desires nor can they respond to changing conditions. Hence, dead hand control may cause a large amount of money to be invested in things that are less desirable, or more money may be invested than what would be optimum, which often happens with bequeathed assets that continually produce income, such as a business or a large investment portfolio.