Boilerplate and Default Rules in Wills Law: An Empirical Analysis

Boilerplate and Default Rules in Wills Law: An Empirical Analysis Reid Kress Weisbord * & David Horton ** ABSTRACT: The prime directive of wills law is to honor a testator’s intent. As a result, lawmakers take pains to populate the field with majoritarian default rules: those that fill gaps in an estate plan with principles that reflect the wishes of most property owners. However, this Article exposes a phenomenon that undermines these efforts. Using an original, hand-collected dataset of 230 recently probated wills, it demonstrates that testators routinely opt out of majoritarian default rules through provisions that appear to be boilerplate. This practice is especially prevalent for “non-salient” matters: vital but obscure topics such as the consequences of a beneficiary dying before the testator, how to divide gifts among multi-generational classes, and who must pay mortgages and death taxes. The Article then uses these empirical results to urge judges and legislatures to reconsider the structure of default rules in wills law. Currently, most non-salient topics are governed by “simple” default rules, which yield to any contrary textual command. Conversely, the Article argues that “sticky” defaults, which are harder to displace, would better insulate a testator’s likely desires from the plague of testamentary boilerplate. I. INTRODUCTION ............................................................................. 664 II. DEFAULT RULES AND BOILERPLATE IN WILLS LAW ....................... 669 A. D EFAULT R ULES ...................................................................... 670 B. B OILERPLATE .......................................................................... 673 III. EMPIRICAL RESULTS ...................................................................... 685 A. D ATA D ESCRIPTION ................................................................. 685 B. R ESULTS ................................................................................. 688 1. Survivorship Language ................................................. 690 * Vice Dean, Professor of Law, and Judge Norma L. Shapiro Scholar, Rutgers Law School. ** Professor of Law and Chancellor’s Fellow, University of California, Davis, School of Law. Thanks to Mark Ascher, Naomi Cahn, Joel Dobris, David Hoffman, John Langbein, David Noll, and Stephen Urice for valuable comments. We are also especially grateful to Surrogate Gary Chiusano of the Sussex County, New Jersey Surrogate’s Court for facilitating access to the public records. 664 IOWA LAW REVIEW [Vol. 103:663 i. Survivorship Conditions and Antilapse ...................... 690 ii. Language of Representation ....................................... 692 2. “Just Debts” .................................................................... 695 3. Tax Apportionment ...................................................... 698 IV. POLICY IMPLICATIONS ................................................................... 699 A. S IMPLE D EFAULTS ................................................................... 700 B. S TICKY D EFAULTS .................................................................... 703 V. CONCLUSION ................................................................................ 710 I. INTRODUCTION On April 5, 2010, a New Jersey resident named Robert Paulson signed his last will and testament. 1 In this short, professionally drafted document, Robert left a house to his daughter, Sharon, and the rest of his property to his wife, Rebecca. 2 Five years later, Robert died. 3 1 . See Will of Robert C. Paulson at 3 (Sussex Cty. Surr. Ct. Apr. 5, 2010) (on file with authors) [hereinafter Paulson Will]. 2 . See id. at 1–2. 3 . See Application Probate at 1, In re Estate of Paulson (Sussex Cty. Surr. Ct. Apr. 2, 2015) (on file with authors). 2018] BOILERPLATE AND DEFAULT RULES IN WILLS LAW 665 Figure 1: Robert Paulson’s Will 666 IOWA LAW REVIEW [Vol. 103:663 2018] BOILERPLATE AND DEFAULT RULES IN WILLS LAW 667 Although Robert’s will seems straightforward, a closer look reveals that one key provision (which we have highlighted in Figure 1) differs from his probable intent. Suppose the house was encumbered by mortgage debt. Would Sharon, who was living in the house, or Rebecca, the residuary beneficiary and executor, be responsible for discharging the outstanding balance? Similarly, who should pay the estate and inheritance taxes imposed on the house? The state probate code presumes that testators want the recipient of land—here Sharon—to bear both expenses. 4 But these presumptions are mere background principles, which testators can override. And in the second paragraph of his will, Robert appears to do exactly that, instructing his executor to pay his “debts . . . [and] inheritance and estate taxes . . . from my [residuary] estate.” 5 This “just debts” clause, which Robert probably did not read and likely could not understand, had the potential to alter the ultimate disposition of his property by forcing Rebecca to subsidize Sharon’s inheritance. Robert’s will highlights a neglected tension in wills law. One of the most important concepts in fields such as contracts, corporations, and inheritance is the default rule. In the last three decades, scores of articles in leading journals have considered how best to calibrate these gap-filling doctrines. 6 4 . See N.J. STAT. ANN. § 3B:25-1 (West Supp. 2017); see also id. § 3B:24-4. 5. Paulson Will, supra note 1, at 1. Courts often interpret a general reference to the testator’s “estate” to mean “residuary estate.” See infra note 118. And unless otherwise provided in the will, estate debts are paid from the residuary estate before being charged against specific devises. See infra note 98 and accompanying text. 6 . See generally, e.g. , Ian Ayres, Empire or Residue: Competing Visions of the Contractual Canon , 26 FLA. ST. U. L. REV. 897 (1999) [hereinafter Ayres, Contractual Canon ]; Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules , 99 YALE L.J. 87 (1989) [hereinafter Ayres & Gertner, Incomplete Contracts ]; Ian Ayres & Robert Gertner, Majoritarian vs. Minoritarian Defaults , 51 STAN. L. REV. 1591 (1999); Ian Ayres, Menus Matter , 73 U. CHI. L. REV. 3 (2006); Ian Ayres, Regulating Opt-Out: An Economic Theory of Altering Rules , 121 YALE L.J. 2032 (2012) [hereinafter Ayres, Altering Rules ]; Ian Ayres & Robert Gertner, Strategic Contractual Inefficiency and the Optimal Choice of Legal Rules , 101 YALE L.J. 729 (1992); Omri BenShahar & John A.E. Pottow, On the Stickiness of Default Rules , 33 FLA. ST. U. L. REV. 651 (2006); David Charny, Hypothetical Bargains: The Normative Structure of Contract Interpretation , 89 MICH. L. REV. 1815 (1991); Richard Craswell, Contract Law, Default Rules, and the Philosophy of Promising , 88 MICH. L. REV. 489 (1989); Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract , 89 COLUM. L. REV. 1416 (1989); Charles J. Goetz & Robert E. Scott, The Limits of Expanded Choice: An Analysis of the Interactions Between Express and Implied Contract Terms , 73 CALIF. L. REV. 261 (1985); Jason Scott Johnston, Strategic Bargaining and the Economic Theory of Contract Default Rules , 100 YALE L.J. 615 (1990); Russell Korobkin, The Status Quo Bias and Contract Default Rules , 83 CORNELL L. REV. 608 (1998); Brett H. McDonnell, Sticky Defaults and Altering Rules in Corporate Law , 60 SMU L. REV. 383 (2007); Ariel Porat & Lior Jacob Strahilevitz, Personalizing Default Rules and Disclosure with Big Data , 112 MICH. L. REV. 1417 (2014); Eric A. Posner, There Are No Penalty Default Rules in Contract Law , 33 FLA. ST. U. L. REV. 563 (2006); Alan Schwartz & Robert E. Scott, The Common Law of Contract and the Default Rule Project , 102 VA. L. REV. 1523 (2016) [hereinafter Schwartz & Scott, Default Rule Project ]; Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law , 113 YALE L.J. 541, 598 (2003) [hereinafter Schwartz & Scott, Limits of Contract Law ]; J.H. Verkerke, Legal Ignorance and Information-Forcing Rules , 56 WM. & MARY L. REV. 899 (2015); Lauren E. Willis, When Nudges Fail: Slippery Defaults , 80 U. CHI. L. REV. 1155 (2013). 668 IOWA LAW REVIEW [Vol. 103:663 The conventional wisdom is that most default rules are—and should be— majoritarian: they reflect what most parties want. 7 By mimicking widely shared preferences, these background principles minimize the transaction costs of drafting instruments that would otherwise have to address every contingency. 8 However, as Robert’s “just debts” clause illustrates, default rules suffer from a glaring vulnerability. Because default rules are so deferential, they can easily be overridden by boilerplate. Indeed, the stock phrase that Robert employed was not custom-tailored for his will; to the contrary, it has been common in estate plans for centuries. 9 This Article addresses the friction between boilerplate and default rules in the realm of decedents’ estates. It does so by analyzing a unique dataset of 230 wills that were probated in 2015 in Sussex County, New Jersey. This trove of empirical evidence reveals that recycled language is endemic in wills. This problem is particularly acute among what we call “non-salient” clauses: those that govern important but obscure topics, such as what happens to the share of a beneficiary who dies before the testator, how to distribute property among multi-generational classes, and whether the recipient of a specific devise or the residuary beneficiaries are liable for mortgage payments and estate and inheritance taxes. 10 Of course, because we can only guess about the genesis of any particular will—we can neither observe the drafting process nor eavesdrop on conversations between the estate planner and the client—we only have circumstantial evidence that these provisions were cut and pasted from previous instruments. Nevertheless, we show that wills often deal with...