Conditional Gifting: What Is It and How to Use It in Your Estate Planning
The most significant decision you can make when creating an estate plan is to choose who receives your property and assets. Conditional gifting is a way of placing stipulations on someone else’s receipt of the assets and property from the estate.
You can require the beneficiary to undertake or refrain from certain actions to receive the gift. An experienced estate planning attorney can ensure that your conditional gifts conform to the laws and are legally enforceable.
Attach Strings to Wills and Trusts with Conditional Gifting
A trust is often the easiest method to leave a gift with strings attached. The trustee remains in charge of the trust and can decide whether or not to release the funds based on whether or not the beneficiary satisfied the requirements.
For instance, you can leave $25,000 to your niece in a trust and use the following conditional bequest language, “I leave $25,000 to my niece Sharon T. Crawford, provided that she enrolls in a four-year college and obtains a 4-year degree before the age of 28.”
General Rules on Conditional Gifting in Kentucky
Courts in Kentucky will try and honor a will-maker’s intent as much as possible. But they draw the line at enforcing a condition that requires the beneficiary to go against public policy or break the law. Typically, public policy grounds are used by the courts to invalidate provisions encouraging harmful or immoral acts.
It can be difficult to make predictions on what the court will decide. These are a few examples of actual lawsuits that were challenged on public policy grounds:
Keeping a widow out of a nursing home (Marion v. Davis, 106 S.W.3d 860 (Tex. App. 2003).)
The will-maker left all his assets in a trust. His will read that the money was to be used to care for Lena (his widow) in a “home care environment.” The will stated that the widow was to be kept in a home care environment until the money ran out. At Lena’s death, any remaining money was to be distributed among three beneficiaries.
Craig, one of the beneficiaries, became Lena’s guardian when the man died. He had the legal responsibility to look after her. Eventually, at the recommendation of Lena’s doctor, Craig placed Lena in a nursing home where she died after several months. The court ruled against Craig by stating that he gave up his right to inherit when he placed Lena in a nursing home in violation of the terms.
Not changing a child’s legal father or name (Nat’l. Bank of Commerce v. Greenberg, 31 Beeler 217 (Tenn. 1953).)
A man established a trust for his minor granddaughter and specified that she would not inherit if she changed her name or was adopted by another man before the age of 18. The Tennessee Supreme Court ruled that the grandfather was looking ahead to the possibility of his deceased son’s widow remarrying and the child getting adopted. This is exactly what happened and since the clause was not against public policy, the child was not allowed to inherit from her biological grandfather.
Not marrying someone of a certain faith (US Nat’l. Bank of Portland v. Snodgrass, 202 Or. 530 (1954).)
A man left all his money to his daughter in a trust. It was provided that she receives monthly payments until the age of 32 when she would inherit the remaining amount. In relation to this, there was a condition that she was not to embrace, become a member of, or marry into the Catholic faith. The daughter got married to a Catholic man and challenged the terms of her inheritance.
The Oregon Supreme Court ruled that the conditions were not unlawful even if they seemed unkind, exacting, and unnecessary.
Get Legal Advice from an Attorney to Make Conditional Gifts
You should consult an experienced estate planning attorney in Kentucky to determine whether your conditions are enforceable or not. You should be as specific as you possibly can about the requirements. Drafting the language is important, which makes it necessary to work with an attorney. Otherwise, the conditions may be confusing and could get tied up for years in court.
The problem is that conditional gifting can open up room for different interpretations. For instance, if you want your niece to receive a gift only if she stops smoking, you may leave room for practical issues and questions if you don’t make any further explanations. For example, who determines whether the niece has actually stopped smoking or how long does the niece need to quit smoking before getting her gift?
An attorney can draw attention to these practical concerns. They may also offer solutions that help prevent conflict, hurt, and indignation.
Choose Our Trusted Kentucky Estate Planning Lawyers
If you want to draw up a conditional will or trust, the knowledgeable estate planning attorneys at John H. Ruby & Associates can help. We will make sure that the document represents your wishes and is worded in a legally accurate manner. To set up your free and confidential consultation with our legal team, call us at (502) 895-2626 or reach us online.
