I was having a conversation with someone recently about rare educational institutions like Cooper Union which provide a tuition-free education, entirely supported by their large endowment.
Suppose I want to found Hypothetical University, and I think super-long-term when it comes to growth. There’s no tuition, but in order to graduate, you must file a legally binding will promising one half of your estate to the HypU Endowment when you die. Every student agrees to this when they enter the program. They don’t actually have to file the will until they want to graduate, so if a student changes their mind, they are free to drop out without repercussions.
Now, the problem is this: suppose a graduating senior files his will promising the required bequest, receives his diploma, then immediately files a new will, disinheriting HypU. What to do? Can the university’s lawyers argue that he has a contractual obligation to keep them in his will? Or can a person put whatever he wants in his will, regardless of any prior agreement?
They can, if your contract is worded as poorly as you did.
You said “you must file a legally binding will promising one half of your estate to the HypU Endowment when you die”. Nothing about keeping that provision in all subsequent wills. So if they file such a will once, they have fulfilled their contractual obligations to you.
A more tightly-worded contract may or may not be legal; I’ll leave that for somebody with
more legal knowledge. But also, there are many other ways to transfer assets to family or friends, so that at your death, there are very few of your assets still remaining with the estate.
This is what I was thinking. My Grandmother signed her house over to my parents over 15 years before she died (and they of course let her live there rent free) so that when she died there would be no inheritance tax.
A similar process could scupper your idea for a business model. Your graduate could just move all his wages and assets into their partner’s name so when they died there would be very little that they could legally be said to own.
If you want to think super long term, you can always do what Ben Franklin did and start a fund that lends money out on interest, and then direct what the fund is to do with the compounded interest.
If it was worded right, yes, I think HypU could do that. Such a provision would not, on its face, be illegal. In a democracy, what is not prohibited is permitted. I suppose some court might rule the contract void as contrary to public policy, but on what grounds? The student got a free education, and the university was to thereafter be a beneficiary of the student’s will. Offer, acceptance and consideration are the required elements of a contract. For the parties it’s win/win, as I see it.
Yes. Put in a “first charge against the estate” clause in the contract, put in a clause that requires the person to make a will with an irrevokable bequest, and put in a clause that requires a notarized copy of the will to be deposited with the beneficiary. That should keep the bequest live even if the benefactor makes a new will.
If the estate is empty, then you are SOL. One way of dealing with this is to also get the benefactor to keep a life insurance policy in place with the benefactor as an irrevokable beneficiary, with part of the initial contract authorizing the beneficiary to be advised if the policy is not being kept up, and permitting the beneficiary to make payments on behalf of the policy holder (note that not all jurisdictions permit this last bit).
Sue grandma claiming that she held the house in trust. The law is changing in this area – up here in Kanukistan it used to be that there was a presumption of gift from a senior parent to an adult child, but just a few years ago, the Supreme Court changed it so that now there is a presumption of trust in those circumstances.
(But of course in the broad view, you are correct, for there is little practical way to keep a person from giving away their assets if they know what they are doing.)
Unless you have some unusual legislation in your jurisdiction, this isn’t going to work. There is no such thing as an “irrevocable bequest” in a will. Your will, and the bequests it contains, are of no effect at all until you die, at which point you are in no position to revoke anything.
You can make a will which will leave asset X to person Y, but you can revoke that will at any time, or it may be revoked by events, e.g. your subsequent marriage. Or you can simply sell asset X, or give it away, while you are still alive.
You have a legal right to revoke your will or to make a new and different will at any time, and you cannot legally bind yourself not to exercise that right any more than you can bind yourself not to vote or not to marry.
(In some jurisdictions the courts will allow a married couple to make “mutual wills” leaving their property to one another and then to, e.g., their children but, even there, the arrangement is only “locked in” when the first spouse dies, after which the surviving spouse is bound to dispose of his estate (including what is inherited from the first spouse) as agreed. While both spouses are still alive either of them can walk away from the deal without penalty. And in any case there’s no analogy here, since there is nothing mutual about the proposed arrangement and the parties aren’t married.)
The other reason why this is a bad idea. You have no idea what, if anything, will be in their estate when they die, and they can very easily arrange matters so that nothing will be.
If you want to do a deal with someone whereby they will give you property on their death, do not rely on their will. They can convey the property to trustees, to hold on trust for them for their life, and thereafter for you.
“Membership in the society is available to all members who make an irrevocable bequest of not less than $1,000 to the ABA Fund for Public Education through a will or codicil.”
Google on “irrevocable bequest” and you’ll come upon a great many example of this sort of thing, e.g. irrevocable testamentary bequest to the YMCA with matching contributions from Bill & Belinda Gates Foundation http://www.stelter.com/clients/pdf/1208Individual.doc
It is the initial contract that creates the obligation, and it directs the hand of the person who then makes a will with terms in the will that are irrevocable. (To really nail it down, the beneficiary would be in a better position if it could prove reliance on the promise of the gift.)
Fair enough; I stand corrected. My rather quick googling suggests that this is a North American phenomenon. Elsewhere the freedom of testamentary disposition seems to be so strong that an “irrevocable bequest” is not possible. Even in the case of mutual wills that I mentioned earlier, if one party welches on the deal (after the death of the other) the new will they make is still valid - i.e. the bequest is revoked, so it’s not irrevocable. Those who are aggrieved at the revocation have an action for damages breach of contract, rather than a claim on the assets that were to be the subejct of the bequest. If the agreed bequest was of a specific property, they might try to establish some kind of constructive trust, but that just goes to the point I made earlier; a trust may be a surer way of doing this than an agreement for a bequest.
UDS, can a creation of a trust for future property be made in Australia to get friedo what he needs? I see that such a thing was mentioned in McFadden, but I was wondering if it is used outside of insurance and pensions?
(BTW, here in Kanukistan, a judge found that beneficiary designations under insurance policies are testamentary, which has opened up a big can of worms, since most wills start with a revocation of all previous testaments, but no one previously thought the revocation applied to life insurance and pensions. :smack: I expect that that decision will be quietly buried, but in the mean time I have adjusted the revocation clause in my template to exclude insurance, pensions and odds and sods that have beneficiary designations.)
Not really my area; I’d need to research the question. My instinct is that it would be (legally) difficult, but my rather stronger instinct is that it would be (practically) silly, and therefore nobody would pay me to do with research.
As regards pensions, the general rule in Australia is that pension fund assets do not form part of a deceased member’s estate unless and until the estate has an immediate absolute right to them under the terms of the trust on which they are held. While the member is alive (and has not retired or otherwise qualified for a benefit) his immediate rights under the trust are limited. One right he does have – assuming the terms of the trust give it to him – is to nominate who will receive any benefit on his death, but that nomination is only exercisable personally (so he cannot bequeath the right to nominate to someone else) and is always subject to revocation or inconsistent exercise (so, while the member is living, a current nominee has only a contingent interest). If the member dies while a nomination is in force, the nominee is entitled to the death benefit. In that situation it passes straight from the trustee to the nominee without ever forming part of the member’s estate.
This might be a bit afield but I’ve seen decrees of divorce that state that one party will leave bequests of one kind or another to the other party – most often insurance policies. I know one poor bastard (literally) who has two policies, one for each ex-wife.
You can get very burned by this. My wife’s aunt transferred her assets into her son’s name. He had the poor judgement to predecease her and died intestate. She did not get along well with the daughter-in-law who ended up with all the property and was left out in the cold.
Without doing any research on the subject, I’m thinking that HypU may be able to go after the graduates’ estates for a breach of contract with the breach occurring upon the death of the graduate. It seems like this would be analogous to a joint will where upon the death of the first to die, the will may be irrevocable*, and the beneficiaries can sue to enforce the terms of the joint will under a breach of contract theory.
Also, where I live there is no requirement to file the will. You can do it, but the clerk doesn’t like to keep them on file.
This varies state by state. In some states, this may or may not be the case.
** I have done no research on this, so I am probably wrong. State law where you live is very different, you probably need to attach a monkey to a will to make it valid.
O.k., so we it sounds like the answer to the OP is probably “not in North America at least” for a will, which we all agree can be screwed with anyway by transferring assets in advance of death to a spouse or other third party as is otherwise legally allowed to leave nothing or HypU. I haven’t heard anyone provide a good answer for the life insurance policy idea.
Let’s assume for the sake of argument that the contract effectively prevents you from screwing HypU before you graduate by dropping put and transferring your units to another university and getting your degree for a fraction of the price somewhere else by completing it there - assume penalties to pay for that based on some sliding scale based on the number of units completed. Let’s also assume there is a life insurance policy and you also have to pay a huge penalty (i.e. the cost of the education adjusted for present value) if you miss a payment and it causes you to void the policy before death. Then does this scheme work?
P.S. I love the future implications of this for a movie where the professors fail everyone in their last class to collect the full payments and penalties or where the university starts hiring hitmen to kill alumni to collect their death payments earlier.
In North America both the life insurance approach and the will approach (be it revokable or irrevokable) are commonly used by universities and charities, along with a number of other aproaches.
BTW, for folks who are considering leaving something to a school or charity in their will, consider leaving a fixed amount rather than a percentage. With a fixed amount, the charity get’s its due and goes away. With a percentage, the charity’s lawyers’ due diligence in ensuring that the charity gets every penny that it deserves sometimes adds to the cost of the administration of the estate.
For example, draft it so that the 2 kids get the first 160,000 split between them, then the charity gets the next 40,000, then the residual gets split between the kids. Don’t draft it so that the kids each gets 2 shares and the charity gets 1 share, for then the charity’s lawyers will start mucking about in the administration of the estate to ensure the charity’s share is as much as possible.