Brewster's Millions is a comedy film about Montgomery Brewster, a minor league baseball player, who inherits $300 million from his great-uncle on the condition that he spends $30 million in 30 days. He cannot own any assets purchased at the end of the 30 days, he must get value for the services of anyone he employs, he may not give it away (except for 5% in gambling losses and 5% to charity) nor may he wilfully damage anything bought with the money – and he must keep these terms a secret. If he fails to comply with any of these terms, he will forfeit the remaining balance of the $30 million spent and the entirety of the $300 million inheritance.
Disregarding the fact that this is a movie starring Richard Pryor with the aim of entertaining audiences, can someone really include terms like this in their Wills? If so, how far can you go? As with any legal case, this will depend on the facts of the case. This article, by Kristian Tyler-Creed in our Contentious Trusts and Probate team, aims to shed light on the intricacies of conditional gifts, so you are well prepared if you choose to include them in your Will.
What is a conditional gift?
A conditional gift is a provision in a Will that says certain conditions must be fulfilled by the beneficiary before they can receive their inheritance. These conditions can be straightforward or more complex. For example, a typical condition is for a child to reach a certain age (18, 21, 25) before they receive their inheritance. In Montgomerry Brewster's case, his great-uncle imposed complex conditions.
The intention behind conditional gifts is often to ensure that the beneficiary meets certain criteria or behaves in a certain manner before gaining access to the intended assets. A testator may wish for their child to go to university and obtain a degree prior to receiving a large inheritance with the aim of that child being able to provide for themselves with a job, and not rely solely on an inheritance. A testator may also add a condition that if their partner marries or remarries, a trust for their benefit comes to an end so that the new partner does not benefit.
In Montgomery Brewster's case, the intention of the conditional gift was to throw someone receiving a yearly salary of $11,000 into the financial world and teach him how to manage a large inheritance. Arguably, though, the true intention of the gift was to entertain audiences and make $45 million at the box office!
Requirements
For a conditional gift to be valid, the condition must be possible to perform, must not be illegal or against public policy, and must not conflict with a gift or other provision in the Will. The courts generally interpret the conditions strictly, keeping in mind the testator's intentions and the overall fairness of the provision.
The case of Smith v Smith held that a condition attached to a gift was void as it was against public policy. The deceased's Will included a conditional gift to his daughter that she must divorce her husband within three years of his death to receive her inheritance. Unsurprisingly, the court deemed the condition void as it was considered contrary to public policy to encourage divorce. The condition failed and the daughter was entitled to the whole gift.
In contrast, the case of Re Smith shows how a testator can positively use a conditional gift. The testator left a conditional gift to his grandson, requiring him to complete a university degree by the age of 25. If he failed to do so, the inheritance would be redirected to his siblings. The court found the condition valid, considering it reasonable and connected to the grandson's personal development.
Avoiding a failed conditional gift
When including conditional gifts in a Will, it is crucial to use clear and unambiguous language to avoid any confusion or potential disputes. Ambiguity can lead to prolonged legal battles, causing emotional distress and financial strain on the beneficiaries.
The testator must also carefully consider the practicality and fairness of the conditions they set. Conditions that are overly restrictive or impossible to fulfil may render the gift invalid or create unnecessary tension among beneficiaries.
Understanding the complexities and uncertainties associated with conditional gifts is vital for those intending to include such provisions in their Wills. By seeking professional advice and using clear and unambiguous language, testators can ensure that their intentions are carried out effectively, while maintaining fairness and avoiding unnecessary disputes among beneficiaries. For further information, please contact our Contentious Trusts and Probate team.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.