Mark Glover, associate professor of law, University of Wyoming College of Law in Laramie, Wyo.
The regulation of inheritance—as it relates to social welfare—is a profound societal issue that’s especially timely in this era of unprecedented wealth inequality. The impact of the accumulation and disposition of wealth by the “1 percent” is a question no longer asked solely by economists and “occupiers.” Indeed, trusts and estates practitioners working with clients at all wealth levels face questions of accumulation and disposition every day as they help clients to decide how they’ll leave behind whatever they’ve accumulated during life. But, rarely does one ask about how all of these decisions in the aggregate impact the welfare of society as a whole. And, what role should the state have in regulating such decisions?
These are the “big picture” policy questions that underlie Professor Mark Glover’s forthcoming article, “A Social Welfare Theory of Inheritance Regulation.” For practitioners, it presents some useful perspective on whether, and how, these individual decisions should be regulated. For policymakers, it provides a framework and makes some recommendations for policy changes.
The article makes three key points: (1) in the United States, the law of succession is based on the fundamental principle of an owner’s freedom of disposition of property; (2) this freedom of disposition supports social welfare because the donor can best determine the social utility of various dispositive alternatives; and (3) some regulation of inheritance is necessary, and there are a few ways that it could be increased or decreased. Because these statements seem—on the surface—to be a bit tautological, additional context would help anyone reading this article. Indeed, Prof. Glover’s 2017 article, “Freedom of Inheritance,” might best set the context for this 2018 article.1
Freedom of Disposition
Prof. Glover starts his analysis by citing the Restatement (Third) of Property: “the main function of the law … is to facilitate … rather than regulate” inheritance. He reviews “how and why the law defers to individual decision-makers regarding the disposition of property after death.”
The freedom of disposition theory rests in part on the notion that a property owner has an incentive to be productive during life, and her heirs have an incentive to take care of her while she’s alive to increase their chances of inheriting later. Donors are in the best position to assess their situation when developing estate plans, which on the whole serve the greatest social utility when they’re ultimately transferred. The law facilitates this freedom through the probate process and its emphasis on plain meaning and donor’s intent.
Regulation of Inheritance
Unfettered freedom, in disposition of property as in all areas, presents potential problems that are best handled with regulation, which, in this case, Prof. Glover asserts should be as limited as possible. He notes that there isn’t a cohesive framework for regulation and cites a few examples of where regulation exists. Inheritance is regulated in both prescriptive and proscriptive ways. Prescriptive restraints include rights of spouses and creditors to take from the estate of a decedent, which serve societal purposes of supporting a marriage partnership and providing certainty for creditors when making loans. Proscriptive restrictions include prohibitions on supporting illegal activity or interfering with marriage.
The rationales for limiting freedom rest on mitigating the risk that—without restrictions—suboptimal decisions could occur based on imperfect information, negative externalities and moral hazards. There’s also a risk that regulation could incentivize conduct against social welfare. This is an area that’s hard to summarize succinctly, but Prof. Glover does it well.
Future Regulations
Prof. Glover ends with a few “Opportunities for Reform.” He proposes increased regulation including establishing a right for the county of the decedent’s death to a share of the estate to provide for a minor child who needs support not provided for in the estate. He would decrease regulation by changing the so-called “slayer rule” (which automatically disinherits a decedent’s killer). He suggests a rebuttable presumption of a donor’s intent to provide for a killer who’s named in the will rather than an outright prohibition on the inheritance. He asserts the social welfare justifications of this change, and this makes for the most interesting, if potentially controversial, part of the article.
Beyond Property
From the first sentence of this article, Prof. Glover places his analysis solely in property law. A natural starting point, this insular focus is perhaps the greatest strength and weakness of his analysis. For example, there are cultural and historical underpinnings of the U.S. concept of “social welfare” and “inheritance” that could shed light on the topic. Similarly, some of the arguments made by Prof. Glover might be better tested by comparison to legal systems beyond U.S. common law. When discussing the obligations of parent to child, for example, it would be useful to contrast the U.S. system of freedom in this area with civil law’s forced heirship. At base, the U.S. emphasis on the individual is embedded in more than just property law, and a discussion of inheritance seems incomplete when it’s purely defined in economic terms. Anyone with a client grappling with the questions of “equality” and “fairness” among children might balk at the assertion that a parent is in the best position to determine his children’s needs, and thus, providing the parent full leeway serves the social utility of meeting these needs economically. Clients are often driven by far more than economic considerations in developing their estate plans.
Similarly, when Prof. Glover asserts the social welfare theory of “externalities” that might incentivize family members, further evidence or justification would be helpful. For example, he cites the notion that children who don’t know whether they’ll inherit from their parents will have an incentive to take care of their parents in the hopes of a “reward” after death. This may be a justification for the freedom of disposition, but it would be helpful to see if any research supports this claim. Anecdotally, and perhaps statistically, the United States has fostered dispersed families in which children may in fact be less inclined to take care of parents than those in other cultures. Conversely, forced heirship in other countries doesn’t seem to have reduced the incentive to take care of aging parents. Cultural issues can be far more influential than legal or economic incentives, as any second generation Chinese family business member well knows.
Prof. Glover notes that there’s yet to be developed an overarching framework to analyze inheritance regulation, and his article is his attempt to provide one. It’s a worthy endeavor, and one hopes that Prof. Glover will continue probing these ideas that should be on policymakers’ minds. It would help to put the analysis into broader context, including comparative law and historical/cultural context.2 Property law alone can’t explain, or manage, the profound issues that social welfare and inheritance regulation must address.
Endnotes
1. See Turney P. Berry, “Review of Reviews,” Trusts & Estates (May 2017), at p. 39.
2. See, e.g., Ray D. Madoff, “Immortality and the Law,” Yale University Press, New Haven, Conn. (2010). See also Brooke Harrington, “Capital Without Borders: Wealth Managers and the One Percent,” President and Fellows of Harvard College, Boston (2016).