Validity of Conditional Gifts: You Only Get This If…

A conditional gift can be as simple as requiring a beneficiary to reach a certain age before he or she receives a gift from a will or trust.  A conditional gift such as this can be important to ensure a young beneficiary has obtained a proper level of financial maturity so that an inheritance remains a blessing and not a curse.  This is just one example of a conditional gift, as conditional gifts can be based on an infinite variety of conditions seemingly only limited by one’s imagination.  That being said, while some conditional gifts will be respected and upheld, others will not.

What types of conditional gifts will not likely be upheld? It is clear from case law that conditional gifts that are contrary to public policy are not likely to be upheld by a court of law.  Examples of conditional gifts that violate public policy include conditions based on restraints on marriage, encouraging divorce or separation, interfering with or involving religion, or those requiring the beneficiary to take illegal action.

While one should be careful when considering conditional gifts that may violated public policy, other conditional gifts are generally upheld. Conditions that involve behavior are frequently upheld, especially when viewed as in the best interests of public policy and the welfare of the beneficiary. For example, requiring a certain level of education can be a valid condition to a gift, as with attaining a certain age before a distribution is made to a beneficiary.

To further complicate matters, conditional gifts are broken down into 1) conditions precedent, and 2) conditions subsequent.  A condition precedent must be met before a gift is given, while a condition subsequent must be maintained to keep the gift.  There are important considerations to be made for both types of conditional gifts, and regardless of whether these various conditions are upheld, one should also carefully consider how practical enforcement of a particular condition would be.

Ultimately, conditional gifts have quite an effective role in obtaining one’s goals within estate planning. However, one should consult with an experienced Estate Planning Attorney to determine whether the conditions being considered will not only be upheld, but whether practically they can be effectively monitored and enforced into the future.