Should Dogs Get $8 Billion from the Helmsley Estate? Posner

Eyebrows were raised when Leona Helmsley left $12 million to her dog in her will, and they were raised even farther when it was learned recently that she had signed a "mission statement" indicating her wish that the charitable trust created by her will, which has an estimated $5 to $8 billion in net assets, be devoted to the welfare of dogs. The judge supervising the implementation of her will cut the bequest to her dog from $12 to $2 million, and it is uncertain how much of the charitable trust will actually be devoted to dogs rather than to other objects of charity, since the mission statement is (according to news reports) not binding on the trustees who will be administering the trust. Section 408 of the Uniform Trust Act makes trusts for pets enforceable (historically they were not--such trusts were called "honorary trusts" and it was up to the trustee to decide whether to enforce the trust even if commanded to do so by the document creating it, as was not the case with the Helmsley charitable trust), but only up to the amount actually required to maintain the pet in comfortable circumstances. This would not necessarily limit the amount left to dogs as a class; there are so many dogs that even $8 billion could be spent on them without any individual dog receiving more than necessary for its maintenance in comfortable circumstances. The possibility that dogs will receive billions of dollars from a bequest presents three interesting questions: why would a person leave so much money to dogs; should such bequests be permitted by law; and should charitable bequests be subject to estate tax, rather than, as they are now, exempt from it? Some pets are kept for essentially practical purposes, such as mousing in the case of cats and home protection in the case of dogs. But increasingly pets are child substitutes or personal companions and, as such, love objects, and hence natural objects of bequests, particularly for childless or wealthy people. And it is natural to extend one's affection to the entire species, just as, if you love any persons, even if just members of your family, it is natural to have at least an attenuated regard for the welfare of other people, even for the human species as a whole; and so with dogs and cats if you have a pet of one of those species. Therefore, odd as it may seem, Mrs. Helmsley's desire to spend billions of dollars on dogs is more easily understood than her desire to give her dog $12 million, since above a far lower amount (probably far below the $2 million allowed by the probate judge) it is inconceivable that the money could increase the dog's welfare; hence the size of the gift makes no sense as an altruistic measure. This may explain why the Uniform Trust Act authorizes the judge to cut down the amount of the bequest to a pet to the pet's maximum comfort level. What makes a trust of $5 billion to $8 billion for dogs seem eccentric is that so much is spent on them already. A bequest of that amount for endangered animal species or other animal-protective purposes would be easy to understand as an environmental measure, but not a bequest for dogs or cats. However, a fundamental premise of normative economics is the subjectivity of values: value is determined by personal preference, and the preferences of adults who are compos mentis and back their preferences with money are not to be questioned by others unless the expression of those preferences would cause uncompensated harms to unconsenting third parties. Moreover, bequests will decline if judges pick and choose which to enforce; and to the extent that bequest motives are a significant force in motivating people to earn money, people may not work as hard to accumulate an estate if judges will not honor their bequests, or, even if they do work as hard, they may save less because consumption becomes more attractive relative to saving when the objects for which people save are not fully chosen by them. As I said, a bequest for a specified animal that greatly exceeds any conceivable estimate of what the animal needs to be as happy as it can be cannot be rationally altruistic, so perhaps the authority that the Uniform Trust Act confers on trustees to cut back such bequests to reasonable limits is justifiable--and for the additional reason that excessive wealth actually endangers an animal, since once it dies the money will go to residuary legatees; and killing an animal is not considered murder (though it can be a lesser crime) and is easier to arrange and conceal than killing a human being. Expensive security precautions have in fact been taken for the protection of Mrs. Helmsley's dog. These concerns do not attend a bequest for a large class of animals. The size of the Helmsley trust does suggest that it might be sensible to impose a ceiling on the charitable exemption from estate tax. For example, the law might exempt the first $1 billion of a person's charitable gifts (whether made during his or her lifetime or at death), but above that level such gifts would be taxed at the ordinary gift and estate tax rates. It is hard to believe that such a change in law would significantly affect work incentives, and it would therefore be an efficient tax. If it did not reduce people's effort level, it would not reduce aggregate personal income, but (because it would reduce the size of bequests and other charitable gifts), it would merely spread it about somewhat differently. Given that much charitable spending is wasteful because of the weak incentives for efficiency of the staffs of charitable enterprises, economic efficiency might be increased if there were fewer and smaller charitable trusts.

Comments

[Jim]

My theory is that the fraudsters in the US are reading the tea leaves and see collapse. That justifies their fraud on grounds that the country is so stupid to allow the political and cultural decline that they, the fraudsters, will have enough sqirreled away to survive in a large and comforable hole in the ground. Has anyone asked them about their motivation?

[neilehat]

Jim, Motivation? That's simple. "Mine, mine, mine - It's MINE!"

Greed is good! To bad we can't tear a page from the Ancients on Civic Virtue, "Public magnificence - private austerity".

[Jim]

Neil,

I agree. But to a certain extent I believe that the greed and indifference to civic virtue is based on the belief that The US is doomed as a rational, civilized entity and that the only thing that will save one is a large amount of money. Otherwise one is at the mercy of morons which includes the public and the politicians. I do not know what Becker would say about the economic and political causes and effects of cultural changes but it seems to me when popular civic and educational levels are at some critically low level, all kinds of bad things happen to a society, greed and indifference among them. Cheers.

[Pinto]

I have two remarks. The first:

"Given that much charitable spending is wasteful because of the weak incentives for efficiency of the staffs of charitable enterprises, economic efficiency might be increased if there were fewer and smaller charitable trusts."

That's an awfully big given. Many charitable enterprises have lower salaries for equally competetent professionals as for-profit peers, lower promotional budgets, etc. (Legal Aid is a far more efficient organization than any law firm I've ever beheld, even if we only considered the level of talent it hires at the salaries it offers.)

An enormous bequest can revolutionize a philanthropic area in a manner that even a very large one cannot; why should arbitrary notions of how many billions are efficient be used to set up speed bumps? There is no legal rationale for incentivizing diffuse over high-impact charity, and your economic one is underwhelming. If the object is to promote charity, what is wrong with promoting extraordinary charity, especially as this is likely to be so rare an occurrence? What is so terrible about a gift so large as to be potentially transformative? Isn't that a good thing?

Secondly and more to the point, I think the trust should proceed as willed. There is no demonstration that she was incompetent. There is only sniping that she was unkind, which determination is truly none of our business. As for whether she had a track record for philanthropy--yes, she did. Not on this scale, but she gave millions to charity in the years after her release from prison.

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