What is a Conditional Gift in Estate Planning?
In estate planning, a conditional gift involves setting specific requirements that a beneficiary is required to meet before they inherit a specific piece of property, money, or assets. Such conditions are typically outlined in a will or trust. They can range from reaching a specific age to achieving educational milestones or demonstrating specific behaviors. Essentially, the beneficiary will only receive the gift if they’ve fulfilled a stated goal or condition. In this article, the Virginia Beach elder law attorneys at the Law Office of Angela N. Manz will discuss conditional gifting in estate planning.
How does conditional gifting work?
- Specifying the conditions – The grantor (the individual creating the will or trust) specifies the conditions that must be met before the beneficiary can inherit. Conditions can be related to time, performance, or behavior.
- Who enforces the condition? – If a trust is involved, then a trustee will enforce the provision. If only a will is involved, then the executor is responsible for ensuring that the condition is met before distributing the decedent’s assets.
- What happens if the beneficiary fails to meet the condition? – If the beneficiary fails to meet the condition, the assets could go to a different beneficiary or be distributed according to the grantor’s instructions.
Examples of conditions
- Temporal conditions – Reaching a specific age, such as 18 or 21, or waiting for a specific number of years to pass after the grantor’s death.
- Performance-based conditions – Completing a specific milestone, such as completing a degree, getting a job, or achieving a specific financial goal.
- Behavior-based conditions – Maintaining sobriety, refraining from certain activities (such as gambling or drug use), or demonstrating responsible money management habits.
- Life events – Getting married, having children, or purchasing a home.
What are the benefits of conditional gifting?
- Control – Conditional gifting allows the grantor to influence how their assets are used after they pass.
- Guidance – Conditional gifting can encourage beneficiaries to pursue positive life goals or avoid negative behaviors.
- Protection – Conditional gifting allows you to safeguard your assets against irresponsible spending.
- Flexibility – Conditional gifting can be tailored to changing circumstances or the beneficiary’s individual needs.
Considerations before implementing conditional gifting
If you plan on placing conditional provisions for asset inheritance in your will or trust, you must be careful to draft the language just right. Vague or unreasonable provisions can be challenged in court.
In addition, conditional gifting can sometimes lead to major disputes among heirs, especially when the conditions are perceived as unfair or laborious. Conditions can potentially create resentment or damage relationships if they are not handled with sensitivity and clear communication.
Conditions can add substantial complexity to your estate administration, requiring the trustee to oversee and verify that specific conditions have been met.
Talk to a Virginia Beach Elder Law Attorney Today
The Law Office of Angela N. Manz represents the interests of Virginia Beach residents who are looking into estate planning. Call our Virginia Beach estate planning lawyers today to schedule an appointment, and we can begin discussing your next steps right away.
