Conditional Inheritances

          A decedent’s will or a trust may require that the beneficiary satisfy certain conditions in order to inherit.  California, like other states, enforces many conditions imposed on inheritances but not those that either violate the law or public policy.   Section 708 of California Civil Code provides that, “[c]onditions are precedent or subsequent. The former fix the beginning, the latter the ending, of the right.”

Conditions precedent must be satisfied to receive a gift.  Examples include: the beneficiary must survive me; the beneficiary must be age 21.  Section 709 of the California Civil Codes provides, “If a condition precedent requires the performance of an act wrong of itself, the instrument containing it is so far void, and the right cannot exist. If it requires the performance of an act not wrong of itself, but otherwise unlawful, the instrument takes effect and the condition is void.”   A “No Contest” clause is a conditional gift clause requiring the beneficiary to accept the terms of the will or trust in order to inherit.  A no-contest clause can be used reinforce conditional gifts. 

Conditions subsequent are conditions that if they occur result in a forfeiture (loss) of the gift.  While California disfavors conditions subsequent a court will give effect if the testator’s intent is clear and there is no violation of law or public policy.  In re Kitchen, 192 Cal. 834 (1923).

Let us consider conditions subsequent related to marriage.  In California, “[c]onditions imposing restraints upon marriage, except upon the marriage of a minor, are void; but this does not affect limitations where the intent was not to forbid marriage, but only to give the use until marriage.” (Section 710, Civil Code.)  In Estate of Earl Guidotti (2001), 90 Cal.App.4th 1403, Earl’s trust provided that, “”[i]n the event [my wife] should remarry, or, live with a man as though they were husband and wife, even though not married, all income payments to her shall immediately stop ….”  The Court looked to whether Earl intended to support his widow while she was unmarried – which would be permissible —  or intended to restrict her from remarrying – which would be void.   Thus it is important to show that the decedent’s intentions were good and not prohibited.

          Let us consider conditions subsequent related to behavior.  Sometimes a decedent’s estate requires the benefits to be suspended or terminated if the beneficiary behaves inappropriately, such as, by getting poor grades in college (resulting in no more college funding); by failing to look after the decedent’s pets (no more free rent); or by using illegal drugs  (no more distributions).  None of these conditions subsequent are either illegal or against public policy. 

To be enforceable conditions must be properly drafted.  The condition would have to be worded in a way that showed the consequence if the condition was not satisfied and provided for an alternative disposition.  The intention behind the condition should also be clear.  For example, if the beneficiary uses illegal drugs all distributions are suspended until the beneficiary has tested clean.

Sometimes failure to satisfy a condition is forgiven, such as when it is impossible to satisfy the condition, the condition requires the beneficiary to violate the law or public policy.  In Schwan v Permann (2018), 28 CA5th 678, the decedent’s trust provided that three named employees of the decedent would each receive a percentage of the Trust if are “employed by Control Master Products, Inc. at the death of Trustor and his spouse and if not, this gift shall lapse and augment the share of the remaining beneficiaries under this paragraph.”  The decedent sold his company prior to his death but two of the three named employees remained employed right up until the company was sold.  The court concluded that, “the two employees who had remained employed till the end had ‘complied with the terms of the trust so far as was possible.’ Impossibility, due to the decedent’s unilateral decision to sell the company, excused any further performance.”

The foregoing brief discussion of a complex and broad subject is not legal advice.  Anyone confronting such issues should consult with a qualified attorney.

Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.