More on Estate of Max Feinberg
In my last post, I wrote about the Illinois Supreme Court's ruling in the Estate of Max Feinberg, which, at least in effect, upheld a trust clause that disinherited Max Feinberg's grandchildren if they married a person outside of the Jewish religion. At least that's how the news is reporting it.
I will not be rehashing all of the facts in this post so if you are unfamiliar with them, please see the previous post.
As I previously wrote, the first thing that the Supreme Court did was to clarify, or change what the threshold issue was. Because Max's wife Erla had an unlimited power of appointment in favor of any of Max's descendants, and because she actually executed the power by changing the dispositive provisions in Max's trust, the clause that caused all of the problems in Max's trust was mostly (but not entirely) irrelevant. She could have given all of the property to one son or to just her granddaughters, and she could have done it outright or in trust.
What she did was to eliminate the trust that would have been established by Max's document, which would have provided for income and discretionary principal to the grandchildren for life, subject to the trust being terminated and the assets going elsewhere if the grandchild married a non Jew. Instead, she appointed $250,000 outright to her two children, and each of her grandchildren who, if Max's trust had been in effect at the time of her death, would have had trusts established for them (i.e. the grandchildren who at the time of her death were not already married non-Jews).
I would like to, again, quote the key paragraph in which the court sets forth what it is deciding:
It's important to note that the beneficiary restriction clause still exists, because upon Erla's death, whether or not a grandchild is married to a non-Jew is used to determine whether or not they inherit. It's also important to note all of the interesting issues that the court did not rule on -- (1) whether the clause is valid if it established a trust for a grandchild only to terminate the trust if he married a non-Jew; (2) what would happen if someone was married to a non-Jew but later got divorced and married a Jewish person; (3) could the court ever decide 'Who is a Jew'. All interesting issues, and all not considered or relevant.Thus, the question we must answer is whether the holder of a power of appointment over the assets of a trust may, without violating the public policy of the state of Illinois, direct that the assets be distributed at the time of her death to then-living descendants of the settlor, deeming deceased any descendant who has married outside the settlor's religious tradition. In effect, we are not called upon to consider the validity of Max's estate plan as a whole, which would have continued to hold the assets in trust for the benefit of the grandchildren only so long as they complied with the restriction. Rather, we must assess Max's beneficiary restriction clause in conjunction with Erla's directions for distribution."
The Court balanced two competing public policy interests -- the right of testamentary freedom vs the right to marry without restriction. But the key point that the Court continued to make was that the grandchildren had no vested rights to inherit at all upon Max's death, or upon Erla's death. Max had given Erla a power of appointment. If Max had died intestate, then Max's children, not grandchildren would have inherited. And it doesn't matter because Erla exercised her power of appointment. At Max's death the grandchildren only had a mere expectancy of inheriting, but no vested right. Therefore, because Erla exercised the power of appointment in such a way that it immediately vested upon her death, and was not subject to subsequent termination, the fact that she chose to appoint the property only to her children and the one grandchild who did not marry outside the religion is valid, and should not be struck down.
While I'm glad that the court reached the right answer, I am a little disappointed that they didn't cover the broader issues. I certainly understand why they didn't though. It seems however, that if Erla hadn't issued her power of appointment, then they would have probably found the clause invalid. I have on more than one occasion drafted trusts for clients that provide just what Max's original trust provided, that if a grandchild married outside of the Jewish religion, the trust would terminate and the property would go elsewhere. I never had a problem with it from either a legal or a moral standpoint.
However, I've been thinking. What if someone asked me to draft a trust which disinherited a grandchild for "marrying someone outside of the white race"? Putting legal issues aside, (Shelly v. Kraemer perhaps?), such a clause would be morally repugnant to me, and I would refuse to do it. Could one make the argument that the "Jewish clause" is the same? I don't think so, for historical reasons, but I can certainly see someone saying so.
