Monday, October 1, 2007
I’d like to thank Al, Ben, and Rose for inviting me to guest blog here.
As Ben said, my first post will be devoted to the so-called Queen of Mean, Leona Helmsley, who died Aug. 20, 2007 at the age of 87. Leona’s will has been given a lot of attention in the press, mostly because it establishes a $12 million trust for the alleged benefit of her dog, Trouble. Somewhat less attention has been given to another provision of the will, which imposes a condition on distributions from another testamentary trust created for the benefit of two of Leona’s grandchildren, David and Walter Panzirer. This clause provides that David and Walter are not entitled to any distributions unless they visit the grave of their father, Leona’s son, “at least once each calendar year, preferably on the anniversary of my said son’s death” (with an exception if David and Walter are prevented from doing so by mental or physical disability). This provision has been criticized as a bad and clumsy example of dead hand control. (Some have cleverly suggested that the beneficiaries could satisfy the requirement by visiting the gravesite for a few minutes every two years, provided they do so just before and after midnight on Jan. 1.)
I have previously written about so-called “incentive trusts” such as these, which are apparently becoming more common, although they tend to be discouraged by leading estate planners. Some would argue that, because Leona has the right to do whatever she wishes with her property during her lifetime, she should be able to attach conditions to its distribution after her death. Given the abolition in many states of the Rule Against Perpetuities, however, it is now possible to tie up property in a trust for several generations. Do we really want the Leona Helmsleys of the world to have the power to restrict access to their property indefinitely? On the other hand, some incentive trust provisions (such as conditions promoting education and hard work) may be socially beneficial, if the beneficiaries are not intrinsically motivated to engage in the desired behavior. In any event, courts will have to wrestle with these issues in the future as beneficiaries inevitably bring lawsuits to modify or terminate incentive trusts.
[Comments are held for approval, so there will be some delay in posting]