The Dead Hand: Can Conditional Bequests Work?

Bequests that are subject to a condition or contingency are often referred to as “dead hand” control. They are often used to incent beneficiaries or to change unacceptable behaviors. A bequest to a beneficiary that is subject to a condition that the beneficiary must abide by the condition or forfeit the bequest is often used in a Will or Trust. While the law generally affords great latitude to impose conditions on a bequest, some conditions may not be enforced either due to public policy concerns, or simply because the condition is so vague that the fiduciary that is directed to implement that bequest cannot ascertain if the condition has been satisfied or not.

Two Types of Conditions: There are two basic conditions that can be placed on a bequest. A condition precedent is a condition that must occur before any bequest is fulfilled. An example would be a $25,000 cash bequest to a grandchild only after that grandchild graduates from college prior to attaining the age 25 years. The beneficiary must graduate from college within a certain amount of time before that beneficiary can receive the cash set aside. A condition subsequent applies to a bequest which is initially given without a condition, but the bequest can be revoked if a specific event later occurs. An example would be that a commercial building is bequeathed to a child subject to the condition that the child may never sell marijuana or any marijuana derivatives on that real property. A condition subsequent is more difficult to enforce due to the fact that it is completely open-ended, and the revocation of the bequest could arguably occur decades after the property was distributed from the trust to the beneficiary.

A common example of a conditional bequest is a direction to a trustee to withhold a distribution until a beneficiary attains a specific age before assets held in trust are distributed to the beneficiary. Similarly, a bequest to a beneficiary who has substance abuse issues may be conditioned on the beneficiary completing a course of drug rehabilitation with continued sobriety for a period after that rehabilitation before a distribution can be made from the trust.

Then there are some strange, if not silly, examples of conditional bequests that have surfaced in court proceedings over the years. Consider the husband who left his home and $30,000 to his widow on the condition that she smoke five cigarettes per day for the rest of her life to spite her for her constant nagging about his smoking during their marriage years. Or, the man who left a cash bequest of $500 ‘to the police officer who issues the most traffic citations to motorists who double-park their cars.’

Public Policy Considerations: As noted, some conditional bequests may not be enforced by a probate judge due to what are called public policy concerns. Conditions that seem to regularly be contrary to a state’s public policy and thus the condition is unenforceable include:

Illegal Activity: A bequest that promotes an illegal activity by the beneficiary will, for obvious reasons, be void.

Restraint on Marriage: A condition that a beneficiary never marries or may not marry a spouse of a particular race will be void. Marriage is a constitutional right as an aspect of liberty, protected by the Constitution’s Due Process Clause. However, a condition that a beneficiary must marry within a specified time to receive a bequest will be enforceable. Similarly, if the bequest is conditioned on the beneficiary marrying after a certain age with a presumed level of maturity, is valid. If a bequest is conditioned on the beneficiary obtaining the consent of parent to the beneficiary’s marriage, that condition will be enforced.

Encourage Divorce: A condition that encourages the beneficiary’s divorce will be invalid. However, a bequest’s condition on the divorce of a beneficiary may be valid if the judge finds that the purpose of the conditional provision was to provide additional support to the beneficiary after their divorce, rather than to encourage or promote that divorce.

Religion: A condition that requires a beneficiary to practice a certain religion is void because it violates the beneficiary’s Constitutional right to religious freedom. Yet some courts have permitted a condition that requires marrying a person of a specific religion in order to receive the bequest. Yet, as the pool of candidates for the beneficiary to marry shrinks, this condition poses the risk of being unreasonable and therefore invalid.

Property Destruction: A bequest that directs an asset to be destroyed by the beneficiary as a condition to the receipt of other assets is invalid, as that destruction of property lessens wealth and imposes an economic cost on society.

Impede Creditors: A condition that hinders creditors, such as a condition that directs the beneficiary to hide assets from creditors, will be not be enforced.

Practical Considerations: Even if a condition imposed on a beneficiary’s bequest does not expressly violate a state’s public policy, the condition may still be unenforceable, particularly if the condition is not phrased clearly or the provision fails to have a clear ‘gift-over’ if the condition fails or is breached.

Impossibility: Some conditions may be impossible to meet. Other conditions may be so uncertain as to be enforced. For example, if the trustee is directed to make a distribution to a beneficiary only when the beneficiary is suitably married, or the bequest is conditioned on the beneficiary taking up a profession, the condition is too uncertain or subjective in order to be effectively enforced.

No Consequence: Some conditions are valid, not against public policy and appear enforceable. However, the provisions that create the condition do not address the consequences of a failed condition. In this situation, some judges have found that the missing consequence of a failure to satisfy the condition reflects a lack of true intent for the bequest to be enforced if the condition is not met.

Cost: In some situations, the fiduciary will be required to monitor the beneficiary conduct or behavior indefinitely to confirm that the condition has not been violated, e.g. a condition subsequent, which may be an expense that was not initially envisioned to monitor and enforce the condition or there are no resources available to assure that the condition was satisfied by the beneficiary.

Circumvent: Sometimes it is too simple for the beneficiary to circumvent the condition imposed on the bequest. Consider the case of Tommy Manville, an heir of the Johns-Manville fortune. Tommy was the beneficiary of a trust that provided that he was ‘to receive $250,000 when he married’. In light of this condition, Tommy promptly married a woman and collected the $250,000 from the trustee. Soon after, Tommy divorced the woman and paid her $50,000 for her trouble. When Tommy later needed money, he would get married, receive the distribution from the trustee, and again conclude the process with another quick divorce. Tommy successfully played this ‘game’ with the trustee 13 times.

Closing Thoughts: If the intent is to use a condition to incentivize a beneficiary’s behavior in a Will or Trust, consider the following points:

The intent to impose the bequest’s condition should be clearly expressed in the Will or Trust. Vague, non-binding language, e.g. my wish that…, should be avoided. A judge is less likely to strike a condition as being mean-spirited if the purpose for imposing the condition is readily apparent from the instrument.

Use a condition precedent if possible. A condition precedent is more likely to be viewed by a judge as an attempt to exert continuing unreasonable influence on the beneficiary.

Address the consequences if the condition is not met by the beneficiary. The Will or Trust should provide for the asset or unmet bequest to pass, i.e. a gift-over, to another beneficiary on the failure of the condition.

Provide objective standards that the beneficiary must meet to satisfy the condition. A vague standard might be viewed by a judge as impossible to fulfill and thus the condition will be void.

The condition should identify who has the responsibility to determine if the subjective standard or condition has been met by the beneficiary.

Anticipate if, at a later date, the condition cannot be fulfilled due to an impossibility of performance. For example, a bequest that is conditioned on the beneficiary taking care of the decedent’s pet would be valid, but the pet died before the decedent, it will be impossible for the condition to be met.

Conditions are often used in Wills and Trusts to provide incentives for accomplishments, motivation for achievements, the protection of naïve or immature beneficiaries, or to eliminate bad behaviors. While this dead hand control can be effective to achieve these goals, not all conditional bequests are enforceable. So be careful when the decision is made to impose a condition or contingency on the beneficiary’s receipt of a bequest.