Are conditional gifts a good idea?
What is a conditional gift?
The classic conditional gift in a Will is a sum of money dependent on the beneficiary reaching an important milestone, such as graduating, getting married or entering a profession. In other words, the testator can add a condition to a gift they’re passing on in their Will.
If properly drafted, conditions on testamentary gifts are valid, subject to some general restrictions on testamentary freedoms that mostly relate to family provision obligations.
Conditional gifts can take the form of:
- A condition precedent, where the condition must be satisfied before the gift takes effect; or
- A condition subsequent, where a gift may be terminated if a proscribed event occurs.
Note: This distinction is important if the conditional gift is deemed void.
Invalidity
Conditional gifts are an area where Will makers can get a little too clever for their own good. Conditions will be ineffective or void if they are uncertain, illegal, impossible to comply with or contrary to public policy.
Invalidity can have some surprising consequences. In the case of a void condition subsequent, the beneficiary takes the gift free of the condition. However, in the case of an invalid condition precedent, the gift fails entirely meaning the beneficiary does not receive the bequest at all.
So, are conditional gifts a good idea?
Most of the time, no.
This is because a testator cannot predict the future. What if your beneficiary has a medical emergency or experiences other financial hardships all while their inheritance is tied up by a conditional gift? Also, restrictive conditions placed on assets may be meaningless once legal ownership is transferred. Finally, if drafted improperly, conditions may ultimately have the opposite of the intended effect.
In other words, testators should be wary of trying to control wealth from the grave.
Your legal advisor can advise you on the appropriate wishes and conditions to include in your Will.
For guidance on your estate plan, contact our Aintree Group Legal team.
This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your lawyer.
