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What if a condition placed on an inheritance can’t be met?

On Behalf of | Dec 7, 2018 | Estate Planning |

Sometimes, when developing an estate plan, people choose to place conditions on the money inherited through wills or trusts. The beneficiary must meet what’s called a “condition precedent.” For example, you may make your grandchild a beneficiary of a trust, but only after they’ve graduated from college or if they use the money to start a business.

Some conditions aren’t legal. For example, you can’t tie a gift to someone getting divorced or married or changing (or remaining in) their religion.

However, if the condition is legal, does it always have to be satisfied for the beneficiary to inherit the money? What if it’s impossible to meet? Then a court will need to weigh in.

For example, sometimes circumstances change, but the grantor of the trust or will doesn’t amend the document before they die to reflect those changes. In one case here in California, a business owner used a trust to leave money to several employees with the condition that they still had to be working for him when he passed away. He sold the company before his death, but didn’t amend the trust.

When they took the matter to court, the judge ruled based on something called the “Doctrine of Impossibility.” This allows for the removal of a condition precedent if it can’t be satisfied. The people who were still working for the company when he sold it received their inheritance. One who had left before he sold it did not.

One way to help prevent situations where your heirs and beneficiaries have to go to court because a condition can’t be met — aside from amending your estate plan as circumstances change — is to include language in the conditions to account for changes in circumstance. Experienced California estate planning attorneys can help people craft their estate planning documents to minimize the need for modifications.