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Conditional gifting... are you trying to rule from the grave?

Don't feel like graduating? Say goodbye to your inheritance!

Conditional gifts in wills in my experience are not overly common, however when such gifts are included the impact can be significant.

In Australia, there have been examples of conditional gifts in wills being tested as to their validity. For instance, the New South Wales Supreme Court in the case ofCarolyn Margaret Hickin v Robyn Patricia Carroll & Ors (No.2) [2014] NSWSC 1059concerned a deceased, Mr Carroll, whom included in his will conditional gifts to his children which would take effect on the basis of them:

  • firstly, attending his funeral; and
  • secondly, being baptised into the Roman Catholic Church within three months of his dealth. Mr Carroll's children are practising Jehovah's Witnesses.

The Court upheld the validity of the conditional gifts in Mr Carroll's will.

Now from the United States, the New York post has, on 27 July 2015, reported on the last will and testament of a multi-millionaire with a $37m estate. The will contains some very prescriptive conditional gifts (full article here).

Mr Laboz who died earlier this year leaving two daughters aged 21 and 17 and a wife, included the following conditions in his will:

  • His eldest daughter will get $500,000 for getting married, however only if her husband signs a sworn statement promising to keep his hands off the cash.
  • She receives another $750,000 if she graduates "from an accredited university" and writes "100 words or less describing what she intends to do with the funds" - with the trustees appointed by the deceased to oversee her money, responsible for approving her essay.
  • Both daughters get a big incentive to earn decent salaries by 2020. Each daughter is guaranteed to receive an annual payout of three times the income listed on their personal tax return.
  • If the daughters have children and don't work outside the house, the trustees will give them each three percent of the value of their trust every January 1st. However this is only in relation to a "child born in wedlock".

The deceased's wife was not included as a beneficiary in the will because there was a prenuptial agreement in place. However, it is understood that they were married at the time of death and therefore the relevance of such agreement is questionable as it relates to the deceased estate.

Mr Laboz's level of control may be considered an extreme attempt at ruling from the grave; however may also be seen as a father trying to instill strong moral values down the generations.

As conditional gifts can be invalidated on the grounds of uncertainty, impossibility or as against public policy, it is important for clients considering any kind of conditional gift, regardless of the size of the estate, to consult with a specialist wills and estates lawyer prior to considering their inclusion.

For more information on conditional gifting, contact David Patkin.

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