question.jpgIn Trusts and Estates

What is a conditional gift?

A conditional gift is where a will’s testamentary gift is based on some condition. There are two types of conditions which can be used with a conditional gift. The first is known as a “condition precedent,” which is where something has to happen before the gift is given. For example, I may include a gift in my will that says “I leave each of my children a cash gift as follows - if they graduate from college before they turn 25, they each get a cash gift of $25,000, otherwise when they turn 25 they get a cash gift of $5,000.” Thus, the gift of $25,000 is conditioned on the children graduating college before their twenty-fifth birthday.

The second type of condition used with conditional gifts is known as a “condition subsequent” which is where the gift is given but is lost if something happens later. For example, if I ran my own business, I might have left the property of that business to my son on the condition that it continues to be used for the business. So he could sell the business to someone else, allowing them to run it, and collect rent on that property. However, if he converts the business to some other business, or tries to turn it into a house, the will’s condition would kick in and he would lose the property.