Halachic estate planning in a secular world

There are methods that not only comply with Halacha, but also offer the financial/personal benefits provided by secular estate-planning tools.

By TIRTZA JOTKOWITZ
Quite the legacy: The will of Alfred Nobel from 1895, which bequeathed the bulk of his fortune to the Nobel Prizes (photo credit: Wikimedia Commons)
Quite the legacy: The will of Alfred Nobel from 1895, which bequeathed the bulk of his fortune to the Nobel Prizes
(photo credit: Wikimedia Commons)
Proper estate planning ensures that accumulated financial resources continue to provide for loved ones’ needs without relinquishing control. Caring for family, as one would if alive, is the essence of good planning; it should also provide for potential disability.
Thus, proper estate planning involves giving what you have – to whom/the way/when you want – in accordance with Halacha, while considering disability.
For Torah-observant Jews, compliance with Jewish law often conflicts with secular inheritance laws. What better time to parse this out than around Shavuot, when the Torah was given at Sinai? The major differences between them are their assumptions and order of succession:
1) Halacha assumes that after death our assets aren’t ours; therefore, testamentary dispositions follow the Torah’s plan. Contrastingly, secular law assumes that assets are ours before/after death; therefore, we can arrange them as we wish.
2) Secular law recognizes a surviving spouse (husband/ wife) and children (male/female) as heirs. Thus, secular laws of intestacy directly violate Halacha, which stipulates: a wife doesn’t inherit her husband, but he inherits her; when survived by sons, they are exclusive heirs; firstborn males are entitled to double portions of certain assets; when there’s no son, daughters are exclusive heirs; when there’s no child, the deceased’s father is the exclusive heir; and, if he isn’t alive, the deceased’s brothers are exclusive heirs.
However, a wife and daughters have halachic entitlements: A husband’s estate must support his surviving widow as he supported her, unless she accepts a lump-sum ketuba payment or remarries. If he’s survived by children under bar/bat-mitzva age, the estate must support them. If he’s survived by unmarried daughters, his estate may need to pay dowries.
Therefore, secular bequests present problems when Torah-observant asset owners wish to distribute property differently from Halacha.
Typically, they wish to include their wife and daughters. However, dying without a will (intestate) or bequeathing via a secular one, could be diametrically opposed to Halacha and compliance may unwittingly constitute theft by invalid recipients – unless brothers over bar-mitzva age “forgive” sisters. Otherwise, assets should be returned to Torah heirs. In limited situations, some poskim rule that, in an “after the fact” situation, exceptions allow reliance on secular law.
Unawareness abounds regarding halachic implications of utilizing certain types of secular estate-planning tools that contradict the Torah’s distribution instructions. Fortunately, there are methods that not only comply with Halacha, but also offer the financial/personal benefits provided by secular estate-planning tools.
Common secular estate-planning vehicles:
1. The simple will
Generally, simple wills are legal documents delineating written instructions regarding testamentary distribution of property. Parents of minor children include guardianship provisions so that, if both parents die, children are raised and finances are administered by individuals the parents appointed; without an estate-planning vehicle, distribution follows state Laws of Intestacy and minor children are placed, accordingly. For Torah-observant Jews, this option is unacceptable. By instructing how the person wanted assets distributed and minor children cared for, a will effectuates the deceased’s intentions and prevents the implementation of the state’s plan.
While simple wills are preferable to no estate planning, their usage entails several drawbacks: • Wills go through probate. This multi-step and bureaucratically controlled process of passing title from testator to others involves: court determination as to a will’s validity; notification of the deceased’s next-of-kin, wherever located and regardless of personal relationship; appointment of the will’s executor; inventory and appraisal of the estate’s property; payment of the deceased’s creditors and taxes due; and distribution to heirs. Finally, time-consuming probate requires servicing by an attorney/accountant/estate administration specialist, thus delaying distribution.
• Wills are public, open to inspection by anyone.
• Because wills take effect upon death, they don’t provide instructions in case of disability, possibly necessitating guardianship proceedings, entailing the time/ expense/publicity associated with court involvement.
• Probate often requires notification of potentially interested parties and, therefore, is more open to challenge.
• Wills don’t provide flexibility. If one owns property in – or moves to – another locale, it can apply its laws, which may differ from the testator’s intent.
• Wills don’t control all assets. Life insurance proceeds, retirement benefits and jointly-owned property may constitute a large portion of an individual’s assets, yet they are not distributed under the will’s provisions.
2. Jointly held property
Jointly held property contains a mini-estate plan due to survivorship features: upon death, property automatically passes to the surviving joint tenant. This form of ownership may be psychologically pleasing but presents potential problems:
• Property may pass to unintended heirs if the surviving joint tenant isn’t the intended heir.
• People misconceive that jointly held property avoids probate. While this property passes to the surviving joint tenant, when he/she dies, the property must go through probate, which isn’t avoided but merely deferred.
• Joint tenancy doesn’t provide tax planning, possibly resulting in tax obligations that could otherwise be minimized/ avoided.
3. Beneficiary designations
Beneficiary designations specify who receives life insurance, pension and profit-sharing plan proceeds, which often constitute a substantial part of one’s estate. Be aware of their pitfalls: • One loses control when designating because one can’t leave instructions.
• When situations change and one forgets to change designations, unintended persons may receive proceeds.
• It won’t protect a spouse from unscrupulous “advisers” or unsuccessful remarriages.
• Minor children can’t own property; proceeds must be controlled by the surrogate’s court until they reach adulthood.
• No tax planning is accomplished.
Evaluating the halachic efficacy of these vehicles Secular law considers simple wills, owning property with another as a joint tenant and planning with a beneficiary designation as testamentary estate-planning vehicles; Halacha considers some of these inter vivos (matanot m’haim) vehicles.
There are questions regarding the halachic status of wills: (1) Are they recognized as valid instruments by Jewish law? (2) If so, or if estate plans are made compliant with Halacha, should they be used to leave property to someone other than those entitled to inherit under Jewish inheritance laws? Historically, many leading halachic authorities consider a will to be invalid when it contradicts the Torah’s order of succession, because both the will and Jewish inheritance laws become effective the moment the testator dies. According to these opinions, Torah law prevails and the will is ignored. In fact, according to many opinions, simply executing a will is prohibited as a diversion of assets from the rightful halachic heirs in a manner enforceable in a secular court.
NEVERTHELESS, there are halachic methods of disposing of assets, while at the same time generating the desired distribution:
1. “Moment before death” clause: Inserted in a will, this states that the contained distribution instructions take effect one moment prior to the testator’s death.
2. Shtar hatzi zachar (instrument of partial equality with a male heir) and Shtar Hit’hayvut (document of assumption of obligation): These involve execution of contrived notes of indebtedness between a testator and a non-halachic heir for an amount greater than the estate’s value, compelling the halachic heir to share or get nothing.
3. Inter vivos transfer: This, from rabbinic and secular perspectives, can be either an outright gift – a shtar matnas boree [contractual gifting by a healthy person] requiring a symbolic form of kinyan [acquisition with obligation] – or an inter vivos trust. By utilizing this form of gifting, one doesn’t violate the Torah’s testamentary framework, as one technically disposes of assets during life, not after death.
Finally, proper estate planning is personal and fact-sensitive.
What’s appropriate for one may be wrong for another.
To ensure obtaining benefits offered by most contemporary estate-planning vehicles, which also meet halachic mandates, consult with a qualified estate planning professional well-versed in these dual jurisprudential realms. In Israel, as elsewhere, secular courts uphold halachic estate-planning documents, if legally executed.
The writer is a lawyer specializing in halachic estate plan- (TNS) ning; tirtzaj@gmail.com