Deciding who should inherit from you in your will, how much they will get and in what shares, are big decisions to make. This can be made more difficult if you have particular concerns about a beneficiary and whether the inheritance could be at risk.
‘Second marriages, family disagreements, or children who have a lot of debt can all be reasons why you might want to retain some control over your assets, even when you are no longer alive to enjoy them personally,’ says Susan Owens. ‘In these circumstances, a conditional gift can allow for greater flexibility. They can, however, also become problematic if not considered with appropriate care and diligence.’
What is a conditional gift?
Many gifts made in a will simply allow the recipient of the gift to receive their money, or other assets, outright once you have died. A conditional gift is one which the recipient will only receive if a certain condition is met.
The condition could be something which is certain to happen, such as the death of another beneficiary, although the timing of the event is uncertain. Alternatively, the condition could be something which is not guaranteed, such as the recipient obtaining a certain qualification.
Conditional gifts are often referred to as ‘contingent gifts’ as they rely on the occurrence of the specified contingency.
Common conditional gifts
Many people choose to leave money to young beneficiaries only once they have reached a certain age. This might be, for example, 18, 21, 25, or any other age.
Whilst this is a condition that is likely to be met, it is not guaranteed. The beneficiary would only receive their money if and when they reach the required age.
A conditional gift may also be in the form of a trust. It is common for couples who have children from previous relationships to include in their wills a life interest trust for each other. Typically, the ultimate aim is for the money, or assets, to pass to their own children after their new partner has died. The children, therefore, are the recipients of a gift which is conditional upon the death of the partner.
Other reasons for making a conditional gift could be, for example, if you have reason to dislike or distrust a beneficiary’s spouse or civil partner, in which case you may make the gift conditional upon them having divorced by the time of your death. You might want to leave money to a grandchild, but only if they attend university.
Making gifts conditional on speculative assumptions such as these is, of course, more risky, as it might be less probable that your grandchild will go to university than them simply living until they are 25. A gift attached to a less probable condition should be made with extra caution, and you should always give thought to the possibility that the condition may never happen and how you would like the gift to be distributed if the condition is not met.
There are many reasons why someone may wish to make a gift conditional, and the suitability and terms of such a gift are highly dependent upon personal circumstances. It is always advisable to seek advice before including a conditional gift in your will.
Pros of conditional giving
Conditional gifts do allow for a greater level of control of your assets post-death, as they take into account alternative circumstances that could occur. If carefully drafted by a legal professional, a conditional gift could allow for a variety of situations.
Gifts which are conditional upon the beneficiary reaching a certain age may protect an inheritance, as many parents and grandparents share the view that their children would be less likely to make sensible investments with their inheritance at 18 than they might at 25.
A gift which is conditional on the beneficiary’s divorce can protect assets from becoming embroiled in divorce proceedings if the relationship is already rocky and likely to end in divorce, ensuring that your assets do not end up in the hands of a loved one’s ex-spouse.
Any gifts which are made conditional upon the death of another person mean that the asset in question will continue to pass according to your own wishes, rather than under the will of someone else.
Cons of conditional giving
If you try to include conditional gifts in your will where the conditions are too stringent or very unlikely to actually occur, those who you would have liked to inherit from you could end up with nothing at all.
A gift with too many conditions imposed upon it can easily become confusing and difficult to administer under your estate.
Including a conditional gift in your will without having taken appropriate legal advice may lead to misunderstanding and misinterpretation, causing the gift to fail or to not achieve the goal you had desired.
How can we help?
Conditional gifts are a useful way of retaining some element of control over your assets, but you should always seek advice as to its appropriateness and legal effects. We can help to ensure that the gift will be legally valid and that it reflects your wishes.
Our solicitors can advise you on preparing a will in a way that ensures your choices are clear and legally binding, as well as helping you to ensure your assets are left in the exact way you intend.
For further information, please contact Susan Owens in the wills and probate team on 01536 523434 or email [email protected]
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