From time to time, testators (will makers) express their intention that proposed beneficiaries of their estate must fulfill a certain condition before receiving a gift under their will or trust document. Such conditional gifts are formally known as “condition precedents” and essentially are a provision in a will or trust that prevents the vesting of a gift or bequest until something occurs or fails to occur. A gift ‘vests’ in a beneficiary when it becomes fully and unconditionally owned by the beneficiary or becomes guaranteed as a legal right, benefit or privilege. For example, many testators stipulate that a beneficiary will not be entitled to a gift until they reach a certain age. Another example is where a person is a substitute beneficiary and they, therefore, will only receive a gift if another named beneficiary predeceases the testator. Another common condition is where the testator stipulates that a beneficiary must outlive them by a certain number days, often 30 days, to avoid paying taxes twice in rapid succession should multiple members of a family die in a common disaster.
Menecola v. Drzazga, 2012 ONSC 6188 (CanLII) was a case of a Polish immigrant who earned considerable wealth working as a full time real estate agent. On his death on May 30, 2007, Leszek Drzazga left a poorly drafted will requiring his three children to invest in real estate for a period of 10 years as a condition of their inheritance. In interpreting that the gift to each son will vest when he has held title to real property for 10 years, the court observed that Mr. Drzazga believed strongly in real estate as a sound investment and wanted to encourage this in his sons.
Condition precedents are contrasted with condition subsequents, which are conditions attached to gifts that have already vested in a beneficiary and will continue to be vested in them until there is failure or non-performance of the condition. In other words, it is a condition referring to a future event, the happening of which will divest the beneficiary of their gift. For example, a testator may grant to their spouse, by their will, use of an asset, such as a house, for as long as that spouse lives or remains unmarried. On the happening of either event, the spouse will no longer be entitled to use that house; the spouse will be divested of that right on the occurrence of the condition. An interesting instruction one of my clients directed for their will is the establishment of a trust under which a caregiver for a pet horse was to receive $1000.00 per month for as long as the horse lived or the estate trustee determined that the caregiver was no longer taking proper care of the horse. The happening of either event would mean that the caregiver would no longer be entitled to receive the monthly sum of $1000.00.
If you would like assistance in preparing a will or trust document that would include conditions under which your beneficiaries will inherit, please contact Andrea Kelly.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.