A Social Welfare Theory of Inheritance Regulation

The law of succession grants donors broad freedom to decide how to distribute their property upon death. It does so in hopes of increasing social welfare in two general ways. First, freedom of disposition generates socially beneficial estate planning decisions. In particular, donors are in the best position to evaluate their own specific circumstances and to make decisions that, on the whole, produce the greatest utility from the transfer of their estates. Second, the donor’s autonomy over estate planning decisions incentivizes socially beneficial behavior, such as productivity during the life of the donor. Because the law views freedom of disposition as maximizing social welfare in these ways, it generally defers to the estate planning decisions of individual donors. Although the law typically relies upon the choices of autonomous decision-makers to maximize the social welfare that is generated by the inheritance process, it regulates inheritance in some circumstances through both prescriptive and proscriptive restrictions of freedom of disposition. Prescriptive restrictions are rules that require donors to distribute property in certain ways thereby preventing them from transferring property to other donees. By contrast, proscriptive restrictions are rules that directly limit freedom of disposition by prohibiting donors from distributing property in particular ways. Scholars have catalogued the various ways that the law regulates inheritance; however, they typically examine them in isolation without developing an overarching framework for analyzing inheritance regulation. To better understand the role that inheritance regulation plays within the law of succession, this Article analyzes restrictions of freedom of disposition in relation to the law’s social welfare goals. It does so both by recognizing defects in the donor’s decision-making process that suggest she might make suboptimal estate planning decisions and by identifying potentially socially detrimental incentives that freedom of disposition can produce. It then explores how particular restrictions of freedom of disposition address these social welfare concerns. Ultimately, this analysis explains how inheritance regulation can maximize social welfare and develops a framework that can aid policymakers in deciding when inheritance regulation is appropriate and how such regulation should be crafted