Kelly, Daniel B., Toward Economic Analysis of the Uniform Probate Code, 45 Univ. of Mich. J. of Law Reform 855 (2012), available at SSRN.
In his article, Toward Economic Analysis of the Uniform Probate Code, Dan Kelly fills a significant gap in the inheritance law literature. As he notes, a number of scholars have brought the lens of economic analysis to bear on trusts but few, if any, have taken a comprehensive look at intestacy and wills using the tools of economic analysis. Kelly takes on this task and the result is an important contribution to the field.
Kelly begins by tracing the important historical move from formalism to a functional view of inheritance law and gives the reader a succinct synopsis of the work of important inheritance law scholars like John Langbein and Larry Waggoner. He then describes the work of a younger generation of scholars like Rob Sitkoff, who has brought empiricism to trust law in particular. This literature summary is helpful in identifying the scholarly gap in the area of intestacy and wills, i.e., succession law.
Kelly applies three tools of economic analysis to succession law: (1) transaction costs; (2) the ex ante/ex post distinction; and (3) rules versus standards. He focuses on what he characterizes as second-order questions of institutional design rather than on first-order questions that address the very purpose of succession, e.g. freedom of testation, replicating or effectuating decedents’ intent and the efficient reallocation of property at death. Kelly hones in on the choice of rules themselves. For example, he notes that there are a number of benefits that flow to the testator by opting out of the default rules of intestacy. These include the ability to choose one’s executor and the guardian of one’s children, to leave bequests to people or institutions who may not be one’s heirs, and to minimize tax liability in some cases. But as Kelly points out, more than half of Americans fail to execute wills. This is, in part, due to transaction costs like the time and effort necessary to find an attorney and pay her fee. If these costs are greater than the benefits of having a will, many people will choose to die intestate. Thus, rules that increase the ease with which one can execute a will presumably produce more will-making. Whether or not that is a social good is another question that Kelly raises but does not answer in this article. He simply makes the point that the choice of rules drives the behavior of citizens one way or another.
Similarly, Kelly cites legal economists Louis Kaplow and Steven Shavell for the proposition that economists embrace the ex ante as opposed to ex post perspective as the superior mode of legal and policy analysis. This view is grounded in the idea that ex ante analysis “incorporates ‘the fact that the choice of legal rules may affect how individuals behave at the outset, which has an important influence on individuals’ well-being.’” It also reflects the view that the ex ante perspective “avoids the possibility of ‘hindsight bias’ by considering ‘all possible outcomes an individual might experience’ rather than just a salient, perhaps atypical, outcome that happens to occur.” Kelly offers a useful example from succession law citing the work of inheritance law scholar Adam Hirsch. He notes that some would argue that the law should limit one’s ability to waive the elective share. But ex ante analysis illuminates the possibility that if that were the rule, some people would not marry at all even though their potential spouses might be willing to waive the elective share. Kelly points out that ex ante analysis by itself does not determine whether waiving the elective share is a good or bad policy choice. But it does yield information that may be useful to policymakers in the process of choosing a rule.
Finally, Kelly turns to a third tool of economic analysis – rules versus standards. He describes this concept in terms of legal commands taking two forms. Rules are “commands that are given their content ex ante or before a person acts. (e.g., a rule that a driver not exceed 55 m.p.h.).” Alternatively, standards are “commands that are given their content ex post or after a person acts (e.g., a standard that a person drive “reasonably”).” Choosing which is optimal is aided by an evaluation of the costs and benefits of each in a particular context. Kelly notes that “rules entail higher drafting costs, lower decision costs, greater predictability and consistency, . . . lower agency costs” but less flexibility to do justice in a particular case. Standards, on the other hand, “involve lower drafting costs, higher decision costs, less predictability and consistency, higher agency costs and more flexibility” to make a contextual decision that may enhance fairness. In the context of the Uniform Probate Code, which incorporates both rules and standards, intestacy provisions that give a specific share to a surviving spouse constitutes a rule while the provisions that govern whether a parent-child relationship exists that turn on whether someone “functioned as a parent” constitute a standard. Kelly argues that being aware of the costs and benefits of each helps explain some of the choices made by the drafters of the Uniform Probate Code and will enhance its future development.
In the final part of his article, Kelly turns these three tools of economic analysis toward various provisions of the Uniform Probate Code. He concludes that “[m]oving towards an economic analysis of succession law that combines theoretical as well as empirical research has the potential to pay dividends for future law reform.” This article persuaded me that, in fact, Kelly is absolutely correct. With clear, elegant prose, Kelly has given the reader an excellent primer in the tools of economic analysis and has offered inheritance law scholars an important addition to the canon. I look forward to more scholarship by Kelly that builds on this very strong foundation.