Can you impose a “religious test” on your beneficiaries – or for that matter any other life style test – or else they become disinherited from your estate after your death? This is an intriguing question that became the point of contention in an Illinois case.
Looking at In re Estate of Feinberg, Max Feinberg created a trust in which he declared that any grandchildren or lower descendants who marry outside of the Jewish faith are to be treated as if the grandchild predeceased the grandparents, thereby denying the grandchild a share of the inheritance unless the spouse of such descendant has converted to the Jewish faith. The parties to the litigation call this “the Jewish clause”.
An Illinois circuit court held that this Jewish clause was invalid and an appellate court confirmed, both finding the clause unenforceable and against public policy. Generally speaking, courts will find such constraints against public policy if they either encourage divorce or discourage marriage itself.
One of the judges of the appellate court disagreed, stating that the clause should be held valid. “Max and Erla had a dream…to preserve their 4,000 year old heritage,” Justice Alan J. Greiman noted.
Max and Erla Feinberg were survived by five grandchildren. All of the grandchildren married, but only one married a Jew. Several cases erupted against the estate plan. They were consolidated into one case and the question about the Jewish clause went to the appellate court.
One of the grandchildren, Michele Trull, who had married a non-Jew sued the co-executors of the estates. Those executors happened to be Michele’s father, her aunt and uncle. Michele claimed that the three had engaged in a conspiracy to evade estate taxes and had misappropriated millions of dollars from her grandparents’ estates. Apparently the amounts left in the grandchildren’s shares exceeded the Feinberg’s generation skipping tax exemption. So the executors sought to enforce the Jewish clause to pull amounts back to the children’s generation, to which the executor’s belonged.
The executors of the estate sought to have Michele’s case dismissed because the Jewish clause deemed Michele to have predeceased her grandparents and therefore she had no interest in the estate.
The appellate court’s opinion explored the public policy argument voiding the Jewish clause. Such a clause is invalid if it encourages disruption of a family relationship, discourages formation or resumption of such a relationship, or seriously interferes with a beneficiary’s freedom to obtain a divorce or exercise his or her freedom to marry.
It is conceivable that such clauses “could just as well result in the courts being required to enforce the worst bigotry imaginable,” Justice Quinn noted. “Courts are not well suited to decide all the various questions that might arise in the enforcement of such conditions. What would happen if one of Max and Erla’s grandchildren initially married a non-Jewish person but subsequently married a Jewish person? Would the grandchild be resurrected upon the second marriage?”
Justice Greiman, on the other hand, who dissented, examined a multitude of cases from outside Illinois. Most were decided in the 1950s or earlier, but sided with enforcing such a clause. According to those cases, “partial restraints on marriage are valid unless they are unreasonable, and therefore conditions on gifts prohibiting a beneficiary from marrying a specific individual have been upheld.”
Given the heated exchange between justices Greiman and Quinn, the Illinois Supreme Court agreed to hear the case. In its decision, the Illinois Supreme Court unanimously upheld the right of individuals to unequally bequeath assets based upon religious beliefs. The Court cited that individuals could legally disinherit any family member who married outside of a particular faith, so long as such a method did not encourage divorce, which would be against public policy.
Supreme Court Justice Rita Garman wrote, “although those plans might be offensive to individual family members or to outside observers, Max and Erla were free to distribute their bounty as they saw fit and to favor grandchildren of whose life choices they approved.”
The Court determined that at no point did the trusts encourage the grandchildren to divorce or remarry within their faith. Garmin noted that the trusts’ provisions were not intended to control, but rather “made a bequest to reward, at the time of her death, those grandchildren whose lives most closely embraced the values that she and Max cherished.”
This important decision upholds a person’s right to include conditions in his or her trust on inheritance. This decision likely extends beyond religious preferences. Trusts that have conditions imposed upon a drug addicted or alcoholic beneficiary prior to receiving their inheritance will also likely benefit from this ruling.
Whether a Florida court would rule in the same way remains to be seen. I don’t know of any cases in Florida that are similar – so although this case might not be legal precedent in Florida – the decision may sway a Florida court nonetheless.
If you wish to include conditions on a beneficiary’s inheritance, it is always wise to consult with your estate planning attorney to make sure that the provisions are properly drafted to minimize the chances that a beneficiary successfully challenges them.
©2023 Craig R. Hersch. Learn more at www.floridaestateplanning.com