Conditional gifts in estate planning.When creating your estate plan, one of the most significant decisions is choosing who receives your assets and property. Not only do you select the beneficiaries, but you can go a step further and require that the beneficiary meet certain conditions. This is known as conditional gifting.

Conditional gifts in estate planning allow the testator (the person creating the will) to still exercise some control even after death. If you’re concerned about how a beneficiary will handle the inheritance or you want to ensure that your wishes are carried out, conditional gifting may be a useful tool.

To know whether conditional gifts are right for your estate plan, you need to understand what they are, how to use them, and when they are unenforceable.

Overview of Conditional Gifts in Estate Planning

Conditional gifting is a way to put stipulations on someone’s receipt of property or other assets from an estate. The testator can require that the beneficiary either do or refrain from doing something to receive the gift. If the initial gift falls through because the beneficiary doesn’t meet the condition, an alternate beneficiary will take the gift. For example, the testator may leave $15,000 to his granddaughter as long as she graduates from law school by 2028; otherwise, the money goes to his son.

There are two types of conditional gifts: condition precedent gifts and condition subsequent gifts. What makes them different is the timing of the condition.

Condition Precedent Gift

With a condition precedent gift, the beneficiary must meet the condition before receiving any property or assets. For example, the testator may stipulate that the beneficiary reach the age of 21 or graduate from college or trade school to receive their inheritance. It’s important for there to be a reasonable chance of the condition occurring.

Condition Subsequent Gift

A condition subsequent gift is one where the beneficiary receives the gift but it can be revoked if the condition is violated at a later time. For example, the testator may leave a piece of real estate to his son on the condition that he does not use it for business purposes. The problem with enforcing condition subsequent gifts is the violation of the condition could occur many years down the road, and there may be no one to monitor or enforce the condition.

In our example, let’s say that 20 years after the son inherits the land, he decides to start a vineyard or rent out the home to vacationers or tenants. Now, he’s in violation of the gift terms. But at this point, who’s around to take the land back and determine who should rightfully own the property? If the testator names an alternate beneficiary, then that person would be the one most likely to try to enforce the terms of the gift. However, the alternate beneficiary would have to know that they were “next in line,” know the terms of the condition, know that the condition had been breached, and may have to file a lawsuit to take the property away from the errant heir.

How to Create a Valid Conditional Gift

Not all conditional gifts are enforceable. Although courts typically favor the testator’s wishes, there are some limitations on conditional gifting.

Must Be Reasonable

As a general rule, conditions must be reasonable. The beneficiary needs to have a choice in whether they satisfy the condition, and they can’t be asked to do something immoral or harmful. An immoral, criminal, or otherwise harmful condition is unenforceable, as are conditions that leave the heir no choice. Additionally, courts will not enforce a condition that is a form of punishment for the beneficiary. The condition must also be possible to achieve. And if someone has prevented the beneficiary from meeting the requirement, a court may set aside the condition.

Must Be Legal and Ethical

A conditional gift cannot violate the law or public policy. For example, a court will not uphold conditions on a gift where the beneficiary must:

  • Engage in illegal activity;
  • Marry or divorce a specific person; or
  • Change or convert to a religion.

Now, restrictions on a marriage can be valid if they require, for example, the beneficiary not to marry until a certain age or to marry within a religion. If this type of condition is important to you, consult with an estate planning legal practitioner to ensure the terms are correctly written and enforceable.

Must Be Clear

Conditional gifts in an estate plan must be clearly written and described. Any sort of vagueness or ambiguity that opens the door to interpretation may cause the conditional gift to be unenforceable.

At Beller & Bustamante, P.L., our estate planning lawyers have the knowledge and skill to create conditional gifts that will hold up when the time comes to settle your estate.

Who Decides if a Condition Is Met?

When administering your estate, the executor or personal representative is responsible for carrying out the terms of your will. Thus, whoever is appointed will determine if the beneficiary has satisfied the condition. If the conditional gift is unclear or there’s a question as to whether the beneficiary has met the condition, the executor can ask the court to make a determination.

If conditional gifts are included in the terms of a trust, the trustee will decide whether or not a condition is met.

How to Use Conditional Gifts in Your Estate Plan

You can include conditional gifts in your last will and testament or within a trust. An estate planning attorney can help incorporate conditional gifting in a way that fulfills your wishes and carries forward your legacy.

Should You Use Conditional Gifts in Your Estate Plan?

The use of conditional gifts is an entirely personal choice. Some people like the control it gives them even after they pass away. For those with a substantial estate, it may be advantageous to put limitations on when beneficiaries can receive their inheritance. Speak with an attorney to help you decide if conditional gifting is right for you.

Contact the Experienced Estate Planning Lawyers at Beller & Bustamante, P.L.

Conditional gifts can be an incredibly powerful tool. At Beller & Bustamante, P.L., we take the time to fully understand your assets, family dynamics, and goals for your estate. With that information, we create personalized documents to develop a comprehensive estate plan for you. We use our combined 35 years of experience to deliver legal solutions that protect your assets and provide for your family.

To schedule a consultation, call our office at 904-288-4414 or complete an online form. Let us help you start planning your legacy today.