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Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust

Wills and trusts, instead of designating a specific person to inherit, often name a group or class of people such as your “children,” “issue,” or your “descendants.” So, how the term used is defined could determine who might inherit from your estate when you die, or a trust that you create. There are situations where some people may choose to deliberately restrict, or conversely, increase the definition of the group who might be included in these definitions. For example, some people may wish to limit their largess to those who remain members of a particular faith. Another category that raises potential definitional concerns is for children of someone or a couple who are LGBTQ. This article will explore these considerations in naming and defining descendants in your estate planning documents.

A suggestion of this article, which will be explored in different contexts below, is that for some people, perhaps many, creating a new role of a special trust protector holding a limited or special power of appointment to determine who should be included or removed from the definition of “issue” or “descendant” in the governing legal documents may be worth considering. There remains considerable uncertainty in many situations from religious beliefs to lifestyle choices that could affect the determination of who should be an heir or beneficiary. Those uncertainties are compounded by the advances in medical technology that have created issues that would have been viewed as science fiction only a decade ago. No doubt medical technology will continue to advance and new issues and concepts will arise in future decades. All of this is compounded by the evolving composition of the American family.

Can You Limit Descendants to Only Members of a Particular Faith?

What issues might arise if “descendants” is defined to only be comprised of members of a particular faith? It can be a difficult task to interpret and apply religious heir restrictions. Can you legally impose this type of restriction? If you could legally impose such a restriction, how would you define what a particular faith is? Many faiths have different levels of observance and different sects within them. How would you define what it means to be a member of that particular faith? What can objectively be done to prove that someone is, or is not, a member of a particular faith? Who would be charged with making such a decision? If you prefer a religious body rather than a secular court are you able to mandate that be done? If that might be akin to a mandatory arbitration of the issue, would that be valid? In some states the parties affected must agree to mandatory arbitration for it to be enforceable.

Legal Issues of Restricting Bequests to Members of a Particular Faith

Does this raise legal issues? Does restricting definitions to those who are members of a particular faith, or how to marry only within a specified faith, violate the constitutional rights of someone who is thereby excluded? Or instead is this your prerogative to distribute your wealth how you choose to do so? Clauses limiting included heirs to members of a particular faith may raise questions as to the constitutionality of such a clause. Potential heirs excluded under such provisions have argued that a religious restriction on marriage, for example, violates constitutional safeguards under the Fourteenth Amendment to the Constitution that protect the right to marry.

Courts have held clauses that determine if potential beneficiaries qualify for distributions based on religious criteria enforceable if the potential beneficiaries have no vested interest in the assets. Feinberg v. Feinberg (In re Estate of Feinberg), 235 III. 2d 256 (2009). Another Court upheld the provisions of a will that conditioned the bequests to the testator’s sons upon their marrying women of a particular faith. The Court held that such clauses did not offend the Constitution of the state of Ohio or of the United States. Shapira v. Union National Bank 39 Ohio Misc. 28 De Silva 90-D.C. Colombo 2,187. The courts’ opinions in such cases are narrowly tailored to the specific facts, since individuals are generally allowed to disinherit an heir in most jurisdictions (with the exception of a spousal elective share or a community property interest). The reasoning of the Courts has included that the restriction is not a restriction on the Constitutional right of an heir to marry, but rather on the right of the testator to bequeath property as they wish. The Court’s have viewed the right to receive property by will as a creature of the law, and not a natural right or one guaranteed or protected by either the Constitution.

The issues involved can be quite nuanced. Would a restriction on marriage into a particular faith be viewed only as a partial restraint upon marriage? If the condition were that the beneficiary does not marry anyone, the restraint would be general or total and might be held to be contrary to public policy and void. Some courts have held clauses that limit inheritance based on the religion of an individual to be void against public policy. As a result, some attorneys recommend avoiding a religious based reason for the disinheritance clause if possible, to minimize the likelihood of courts interpreting the clause finding it to be void as against public policy. Even if a religious restriction is likely to be found to be enforceable, might the risk of a challenge, a potentially public lawsuit, etc. convince some to try a different approach?

Emotional Implications of Such Restrictions on the Family

Apart from legal issues, what about the emotional implications of such a clause? Does this result give the child, grandchild or other heir the equivalent of a “kick in the pants on the way out the door?” In other words, if the parent or other benefactor’s true wish is that the descendants or other heirs remain faithful to a particular religion, the harshness of a disinheritance may serve to only assure that the disinherited person never returns to the faith. The pain and hurt of the disinheritance may end up solidifying what may have only been an exploration of different faith options. What might this type of disinheritance do to the family relationships among the person affected and other family members? Will the disinherited child be able to sustain a relationship with the children who are not disinherited? Will any or all of those affected view the benefactor’s action in a negative light? Might that adversely influence the observance of those who might have otherwise remained faithful to the religion?

Creating a Religious Purpose Trust

An alternative approach some have used, is to create a single trust for all heirs/beneficiaries and mandate that the funds in that trust be used for the costs of obtaining a religious education, attending religious summer camps, taking relevant religious studies, religious institutional membership, religious travel, etc. In other words, this trust could use its assets as a carrot to encourage religious observance that the settlor desired for the heirs. But this approach may only partially address the question. Should the remainder of the estate be used for all the heirs regardless of religious affiliation? Is the remainder of the estate put into a separate trust for each heir or one single trust? How are those funds to be divided? What of the costs of now creating and administering an additional trust? Who will be named trustee of the religious trust? Will that person face pressure and perhaps even harassment by the heirs that have moved away from the particular religious path?

Islamic Estate Planning May Raise Unique Issues on Determination of Heirs

The discussion above addressed the determination of who is a descendant with consideration to religious provisions generally. The following discussion will review specific implications to how a dispositive plan compliant with Islamic law may involve determination of who is a descendant.

The Sharia laws of inheritance are somewhat similar to an intestacy statute. One-third of the decedent’s estate may be distributed as the decedent wishes. But the remaining shares of the estate must be distributed as mandated under Islamic law. That law is derived generally from the Quran, Chapter 4 verses 11-12. The inheritance regime under Islamic law creates several potential issues. The residuary inheritance shares (i.e., after the one-third discretionary share above) is restricted to Muslim heirs. This raises questions as to both the constitutionality of such a clause and the difficult task of interpreting and applying such a restriction, as discussed above.

Assuming that such a bequest is not challenged, or if challenged that the court upholds the dispositive plan, there may remain the need to determine who is in fact Muslim to be able to inherit. Who should make that determination? If there is a disagreement as to the status of a potential heir, a secular court will likely not have the knowledge to handle such a matter.

Another consideration is that Sharia law prescribes specified shares of the estate to be distributed to certain heirs. But those shares will change depending on which heirs are alive at the moment of the decedent’s death. So, while a will for a Muslim testator can specify that the dispositive provisions shall adhere to Sharia, the will can specify who those heirs may be at the date of execution. But those may change before the testator dies because of changes in the composition of the heirs alive at the moment of death. Thus, to implement a Sharia compliant dispositive scheme, the plan may need to be interpreted and cemented upon a decedent’s death to determine who exactly is entitled to inherit and in what fractions under Sharia law.

Planning Considerations for a Sharia Compliant Estate Plan

The trust should stipulate who the grantor’s living Muslim heirs are at the time of creation and include a mechanism for determining the final shares on the date of death in the event that:

· One or more of such individuals aren’t alive.

· Additional Muslim heirs are born to the grantor after the execution of the will.

· There’s a dispute relating to the eligibility of an heir to inherit (e.g., that particular heir is no longer Muslim).

It may be feasible to limit the involvement of secular courts in these religious issues by using a pour-over will and a funded revocable trust that will serve as the primary dispositive document. A further step may be possible to bolster the proper application of Sharia law by appropriate experts rather than a secular court. A special appointment might be made under the revocable trust of a person, perhaps referred to as a “Sharia Trust Protector,” who, in a non-fiduciary capacity, may be empowered to make the decisions relevant to the application of Sharia law. This person might be an expert in Sharia law, such as an independent, unrelated, Muslim attorney, Imam or a panel of such experts. The reason for the suggestion that such role be crafted (if state law permits) to be in a non-fiduciary capacity, is that may serve to eliminate any fiduciary obligation such person might be deemed to have with respect to the Sharia heirs as specified in the instrument at the time of execution. If there is uncertainty as to how the estate should be divided among Sharia heirs at death, it may be more efficient and less prone to issues that might arise if persons not steeped in Sharia law are to make the determinations. This determination can negatively impact or eliminate a potential beneficiary’s inheritance share. Therefore, granting the Sharia Trust Protector a limited power of appointment over estate assets to appoint them in conformity with Sharia law, in a non-fiduciary capacity, may avoid issues as to fiduciary duties owed to any named beneficiaries.

LGBTQ Considerations May Affect Who is a Descendant

If you or any family member is lesbian, gay, bisexual, transgender or queer (“LGBTQ”) the law, as well as conventional drafting and planning techniques, may not address the unique considerations that may arise as to whom should be considered a descendant. Thus, it may warrant special steps to carry out your intended wishes as to who your “descendants” are. For example, how should a beneficiary be defined so as to assure that desired heirs are in fact included, and are not inadvertently disinherited? What if a particular heir is designated by name, but thereafter undergoes a name and/or gender change? Might that result in that heir unintentionally being excluded? What if you view a particular child as your own, and treat that child as your own, but share no genetic material with that child?

Children could be adopted or born through surrogacy so that neither parent, or only one parent, is biologically related to the child. For example, two woman are married and one bears a child using donor sperm. The other spouse contributed no genetic material to the child, so her parentage may be an issue in terms of defining that child as her descendant (depending on state law).

While an “equitable-parent doctrine” may be recognized by some states, such that a non-biological parent may assert rights as a parent, that may be limited and not suffice to protect the testator’s goals. For example, that legal doctrine might be limited to those who were living as a married couple but who could not marry because of legal restrictions at that time.

Additional Issues and Concerns Affect the Determination of Who Is A Child

Specifically naming that child in her will and stating that the named child is to be treated as her child should resolve the issue of the child inheriting. However, it may not resolve all issues. There is always the potential problem that if the will is not revised to reflect the new child or relationship, the intended beneficiary could be omitted. What if the will or trust is held invalid in a challenge?

Taxes may present another issue. For example, the couple resides in a state with an inheritance tax, if the child is not deemed a child under state law, the bequests to that child, even if preserved by an express will provision, may be subject to state inheritance tax. Had the child qualified as a child under state law they may have been a beneficiary not subject to inheritance tax. But if they do not qualify, they may be subject to the highest inheritance tax rates.

Adoption Sometimes Provides a Solution

The question of whether a particular individual is treated as a child may be resolved if that individual could be formally adopted. But it will still require that an adopted child fall within the definition of “child” under the governing will or trust. But in some cases it may not be feasible for legal or other reasons for the particular child to be formally adopted. The discrimination and other challenges that the LGBTQ testator may have in adopting a child may also be an impediment to this step.

In some instances state law might provide a simpler solution in the form of a confirmatory adoption proceeding. That may require less cost and steps than a general adoption proceeding. That may suffice to corroborate the parentage of the spouse who did not contribute genetic material and did not bear the child may be necessary or at least advisable. That may assure the desired inheritance and avoid an undesired inheritance tax.

Should The Trustee Be Given the Power to Add Beneficiaries?

Given the risks, uncertainties and challenges that may face an LGBTQ parent, perhaps further steps might be integrated into the documents to endeavor to address these issues. One approach might be to provide the trustee with the authority to add to the class of children or beneficiaries the particular individual who’s treated and loved as a child even though, technically, not a biological or adopted child of the testator. While that approach could work, it may present potentially significant issues. The person acting as a trustee has a fiduciary duty to the beneficiaries named in the instrument. If the trustee adds an additional person that they believe the settlor or testator viewed as a “child” to the class of beneficiaries, they may be argued to have violated their fiduciary duty and duty of loyalty to the named beneficiaries. That argument may foment litigation.

Might a Name or Gender Change Disinherit an Intended Descendant?

Another category of issues may arise with LGBTQ beneficiaries if a named beneficiary changes their name or gender. Might a name or gender change inadvertently result in that person being then omitted as a beneficiary? For example, consider a beneficiary who changes their name from “John Doe” to “Jane Doe.” Will a bequest of “My gold Rolex to John Doe” now lapse because there is no John Doe? What if the oldest son has gender confirmation surgery and transitions to female. What will the impact be of a bequest that was phrased as: “I bequeath my diamond cufflinks to my oldest son.” Will this lapse or would another child claim the diamond cufflinks? How can planners help testators avoid ambiguity and family strife in these situations?

The simplest and obvious solution to the above issues is to endeavor to draft to contemplate these potential changes. “My gold Rolex to John Doe.

    . I recognize in making these bequests that should any beneficiary indicated change their name that the bequest is intended to continue to such person.” Will that suffice for a name change? It would seem so. Would that suffice through a gender transition? It would also seem so, even without specifying it. If the testator is aware that a named beneficiary may transition they could be even more specific: “…I recognize in making these bequests that should any beneficiary indicated change their name, or gender, that the bequest is intended to continue to such person.”

    The above bequest can be phrased differently if the testator wishes. For example, “I bequeath my diamond cufflinks to my oldest child assigned male at birth, i.e., my cisgender son.” But this provision could be problematic. If the son transitions, will that child still inherit the intended property? The bequest is vague on that point. The preceding bequest might assure that the oldest child who was born male and remains male at the time of the testator’s death might inherit the diamond cufflinks. But, is that the testator’s intent? Might the testator prefer to have the particular child named inherit the diamond cufflinks regardless of a later name or gender transition? If a testator wants to make certain gender specific gifts, consider exploring the intent of the gift with the testator.

    But the simple solution illustrated above is fraught with practical issues:

    · Testators almost universally delay amending and restating documents, and their intended bequest could be challenged, misdirected or lapse as a result of an old document not addressing these circumstances.

    · What if the child has not communicated these personal matters to the parent or other benefactor?

    · If the language used is vague, as illustrated above, the language itself may create the interpretive issue.

    · If the child transitions and is uncomfortable with the use of their former name (dead-name) will the mere bequest in the will create discomfort or worse? In such cases using a pour over will that does not list family members, which pours into a revocable trust that contains the dispositive provisions, may be preferable. While the will may be a public record document when filed for probate, if there is no litigation or other events that require a filing or disclosure of the revocable trust, that may remain private. That may be a better default approach for many testators.

    Might the Testator Wish the Opposite?

    The above discussion presumed that the testator would wish to continue the legacy despite a child or other named beneficiary transitioning. But that may not be the testator’s actual feelings in this regard. Perhaps the testator has a devout religious background and may choose instead to intentionally disinherit a child that transitions. If that is the case, then the governing legal documents should be very clear in what they intend, as it would seem that if it is possible through clarity of memorializing the testator’s wishes litigation over the intent of the dispositive plan may be able to be avoided.

    Consider Naming a Special Trust Protector To Address LGBTQ Issues

    There is another approach that is novel but might warrant consideration for testator’s who might or do face these considerations. The legal document, e.g., a revocable trust, could name a person to act in a defined capacity to address the types of issues noted above. This role could be given a name such as “LGBTQ Trust Protector,” or some other name. This person may be a type of trust protector who would be empowered to address the issues described earlier. In that way, if sufficient powers are provided to this person, they could make the decisions without the need for court involvement and the negative publicity, cost and animosity that might trigger. In many situations, the particular concerns may not be known at the time the document is drafted, and it may be prudent to add provisions allowing flexibility in managing and addressing issues that may arise in the future.

    Who might be named in this role of LGBTQ Trust Protector? Perhaps a family friend understanding of the issues involved and who has a relationship with the particular heirs who may be affected could be named. Perhaps an organization such as the law firm that drafted documents and which is intimately familiar with the testator’s wishes could be named.

    This power would be analogous, in some respects, to the power given to an individual in a hybrid-domestic asset protection trust to appoint additional beneficiaries (although the uncertainties of adding the settlor in a hybrid DAPT are not relevant to this application of the concept).

    Another power that the testator might consider giving to the LGBTQ Trust Protector is a power to direct distributions to beneficiaries for medical (including transition expenses), adoption, family planning and other costs that a trustee may not believe are covered under the terms of the governing instrument.

    The LGBTQ Trust Protector Should Serve in a Non-Fiduciary Capacity

    The person or entity serving in this capacity as LGBTQ Trust Protector should be designated in the legal document as serving in a non-fiduciary capacity. Whether that can be done will depend on state law. If the particular state where the testator resides mandates that a trust protector serve only in a fiduciary capacity, then it may be worthwhile to create the trust in a different jurisdiction. That may be feasible but might require or at least suggest that a co-trustee in that jurisdiction be named, an account may be worth setting up for the trust in that jurisdiction, etc. The rationale for a non-fiduciary capacity is that the LGBTQ Trust Protector may have to add a beneficiary to the plan (e.g. an individual treated as a child by an LGBTQ heir who did not meet the formal legal requirements of an heir; a non-adopted child who’s clearly an intended beneficiary, etc.), or salvage a situation where a person who was perhaps intended to be a beneficiary but who lost that status because of a name change or transition under the terms of the governing documents or state law. If the LGBTQ Trust Protector is designated as serving (or required by state law to serve) in a fiduciary capacity those actions may violate the LGBTQ Trust Protector’s fiduciary duties, duty of loyalty due other beneficiaries, etc.

    It may not be possible, under the law of some jurisdictions, to name a Special Trust Director to act in a non-fiduciary capacity. The LGBTQ Trust Protector may be considered a trust director within the meaning of the Uniform Directed Trust Act or an individual with the power to direct the trustee under former Section 808 of the Uniform Trust Code. If the governing jurisdiction has adopted a version of one or both of those acts, the applicable statutory law may provide that the Special Trust Director, if considered a trust director, acts in a fiduciary capacity. In some cases, which may be the default under the statute, which may be overridden by the terms of the governing instrument. In any case, it will be necessary to know the jurisdiction’s applicable law on this subject. If there remains uncertainty as to whether the LGBTQ Trust Protector can serve in a non-fiduciary capacity, consideration should be given to structuring a revocable trust as the primary dispositive document, in a state that permits a trust director to serve in a non-fiduciary capacity.

    Should A Special Trust Director or Protector Become a Common Provision in Estate Planning Documents?

    As explained in the introduction, the questions of who should be included as an heir or beneficiary are complicated, evolving and can raise considerable uncertainties. Medicine and scientific knowledge continue to evolve. The overlay of changing family structure and religious beliefs based on very different values may all have an impact. While lawyers might be able to draft provisions in documents to address these concerns, the practical reality is that it is likely impossible for an attorney to contemplate all the future changes in society, medicine, values and more. For some, consideration of a special trust protector charged with making these decisions when uncertainty arises from the provisions crafted to carry out the wishes (and provide a framework for the trust protector) of the testator may be helpful. Since this is a novel concept proceed with great caution and carefully consider how broad the powers granted to this person might be.

    Sample Clause

    Appointment of Special Trust Director to Clarify Heirs and Beneficiaries

    The person, and any successors, appointed hereunder, shall be referred to as the “Special Trust Director.”

    The initial Special Trust Director shall be *Name, who resides at *Address OR the Law firm of *Name of Firm and its successors and assigns (and such firm may designate a partner to act specifically on behalf of such firm in this capacity).

    If the initial Special Trust Director is unable or unwilling to serve, then the first person of the following who is able and willing to serve, shall so serve:

    *Name, *Address.

    *Name, *Address.

    If no person of the forgoing is able and willing to serve then the Trustee and eldest beneficiary [or other named persons], shall have the authority to designate a successor Special Trust Director. The designation of a successor Special Trust Director shall be determined by unanimous agreement of such persons.

    The Special Trust Director shall have the following powers [These need to be modified and revised to address concerns of the settlor and issues that might be anticipated]:

    1. The power to clarify or modify who is deemed to be a child born of a particular marriage for purposes of establishing a beneficiary hereunder.

    2. The power to interpret when an individual born using Assisted Reproductive Technologies is to be deemed a child of a person who is subsumed under the definition of “child,” “issue” or “descendant” under this Trust Agreement.

    3. The power to lengthen or shorten the period of time following the death a person who is subsumed under the definition of “child,” “issue” or “descendant” under this Trust Agreement of a person posthumously conceived using the genetic material from such person.

    4. The power to clarify or confirm the religious status of any person named in this Trust Agreement, if same is relevant to the dispositive plan hereunder.

    5. The power to clarify or correct the name of any person named in this Trust Agreement, whether due to name change or other reason. This power shall include the clarification or correction of any name for any beneficiary or other person named in an instrument, including powerholders, fiduciaries, and persons designated to act in non-fiduciary capacities.

    6. The power to correct or otherwise change any references to gender in this Trust Agreement to avoid any beneficiary from being excluded or otherwise having a beneficial interest changed. This power shall include the power to correct or otherwise change any references to gender for any powerholders, fiduciaries, and persons designated to act in non-fiduciary capacities, if necessary or advisable in the Special Trust Director’s discretion, to avoid having such person prevented from so serving.

    7. The power to create a separate instrument confirming the current name or gender of any beneficiary, fiduciary or powerholder hereunder for the above purposes.

    8. The Special Trust Director shall have the authority to direct the Trustee to decant this Trust into a new Trust with administrative changes necessary in the Special Trust Director’s view to carry out the settlor’s wishes in light of current circumstances. [Note that the preceding sentence is very broad and only should be used with caution, and perhaps must be modified to reflect the concerns of the settlor in all of these matters]. with the use of only the names the Special Trust Director indicates and expressly excluding any names of such persons as specified.

    9. The power to direct the Trustee to make a distribution to or for any beneficiary or potential beneficiary for:

    a. Adoption proceedings even if the result of same is to add the adopted person as a beneficiary hereunder.

    b. For religious conversion proceedings even if the result of same is to add the adopted person as a beneficiary hereunder.

    c. OR

    d. Medical and related expenses including, but not limited to, mental or physical care, gender confirmation surgery, related procedures, cosmetic or reconstructive surgery, counseling, medications, and family planning, including, by way of example, fertility treatments, adoption, and surrogacy costs and related legal fees and travel costs.

    10. The power to direct, in a signed, acknowledged instrument, that a specifically identified person, other than the Special Trust Director, the Special Trust Director’s estate, a creditor of the Special Trust Director or of the Special Trust Director’s estate, or any person related or subordinate to the Special Trust Director within the meaning of Code Sec. 672(c), shall be included in the definition of “descendants” for purposes of this Trust Agreement. Any such direction shall apply prospectively, beginning on the date such signed, acknowledged instrument is delivered to the Trustee. [This is a very broad power and should be carefully evaluated].

    11. To the extent not prohibited by applicable law, the Special Trust Director shall not be treated as acting under a fiduciary duty, shall not be required to exercise the powers granted to the Special Trust Director hereunder, and shall have no duty to monitor the actions of any Trustee acting hereunder. However, the Special Trust Director must act in good faith and in accordance with the intent of the [settlor/testator] expressed herein.

    4. The Special Trust Director shall be compensated as follows [add here].

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