What is Conditional Gifting?

When creating an estate plan, one of the Will-maker’s most significant decisions is choosing who receives their assets and property. Not only can the Will-maker select their beneficiaries, but they can also go a step further and require that the beneficiary meet certain conditions in order to receive their gift. This is known as conditional gifting.

What are some examples of Conditional Gifting?

A Will-maker can attach conditions or stipulations (usually, doing or refraining from doing something) that must be fulfilled in order for the beneficiary to qualify for the gift. If the beneficiary does not meet the conditions, an alternate beneficiary will take the gift. These are some examples of gifts that have been made conditional:

• • John leaves his prized Corvette to his granddaughter as long as she graduates from college before turning 30; otherwise, the car will go to his son instead.
  • Eileen leaves $50,000 to her nephew if he is living in France at the time of her death; otherwise, the money will go to her children.
  • A 1949 Will gave the Will-maker’s daughter all future income generated from a farm, provided that the daughter did not “smoke or drink intoxicating liquor”; otherwise, the income would go to her grandchildren.

There are limits to a Will-maker’s ability to impose conditions on a gift.

The Courts will not uphold conditional gifts that are illegal, uncertain or against public policy.

A condition must be written in clear terms so that your executor knows whether or not the requirements for the gift have been met. (For example, the condition against “intoxicating liquors” might not be upheld today, since it is not entirely clear what could fall into that category, nor how the executor would determine the condition had been fulfilled).

A Court will also strike down conditions that prevent or obstruct a beneficiary from exercising their legal rights, or that place restraints on marriage, religious beliefs, or that are discriminatory based on race or gender. The Courts would declare these gifts to be void, despite the Will-maker’s intentions. These are some examples of gifts that we struck down by the Courts as a matter of public policy:

•  A gift to a Will-maker’s son, on the condition that the son was not married to a specific person whom the Will-maker disapproved of, or a gift to a daughter on the condition she was not married to someone of a certain religion.
• A gift to a child, on the condition that the child not live with a certain parent.
• A gift which required a beneficiary to remain in a “mainstream Christian church” in order to receive his inheritance.
• A bursary created for students who must be Caucasian, single and heterosexual and not feminist in order to receive the award.

Takeaways

Because of the many legal issues that these types of gifts can create, Will-makers should obtain legal advice prior to including these gifts in their Wills, and the terms of the gifts should be carefully drafted by a lawyer, to ensure there are no issues with interpretation nor enforceability.

If you have questions about your estate plan or would like to talk to a lawyer about how your wishes can be put into effect, contact Leah Card or a member of our Wills & Estates Team – we’re here to help.