An unemployed heiress to a $12 million fortune is being declined access to her inheritance due to a term outlined in her late father’s Will that stipulated she must get a job or take part in voluntary work in order to benefit from his estate. Conditional gifts in Wills can be acceptable by law and may present an opportunity to Will-makers who are concerned that beneficiaries in their Will may not maintain assets as they intend, explains Attwood Marshall Lawyers Legal Practice Director Jeff Garrett.
Background
When Ms Clare Brown’s stockbroker father, Chris, died in January 2022, the 26-year-old was left with a $12 million fortune.
However, the inheritance came with two crucial clauses – that she get a job and contribute to society.
Ms Brown failed to meet these conditions and is now contesting her father’s Will, arguing that a range of health issues coupled with NDIS funding cuts impacted her ability to gain employment.
The former private school student has stated that employers won’t consider her for a position because she’s gay, and she has difficulty holding down employment due to having ADHD (Attention-deficit/hyperactivity disorder) and high-functioning autism.
Can you put contingencies in place to protect your children’s inheritance?
In the words of famous American business magnate and billionaire, Warren Buffett,” leave the children enough so that they can do anything, but not enough that they can do nothing”.
Many parents are concerned about their children’s ability to manage finances when they are gifted a substantial estate after a parent passes away. This is particularly the case within families who hold significant wealth.
Not many of us need to worry about leaving our children so much wealth that they could comfortably choose to do nothing. However, many middle-class parents still worry that their children (or grandchildren) might squander an inheritance on drugs or gambling, make bad financial decisions, or be manipulated by a spouse.
There are strategies that can be utilised to ensure family inheritance is protected and that beneficiaries who may be vulnerable can have controlled access to these assets.
When making a Will a person can decide to include a “vested interest” or a “contingent interest”.
By including a contingent interest, a Will-maker can prevent their child/ren from inheriting under the Will until they reach a certain age or milestone.
A Will-maker can stipulate that a beneficiary must satisfy certain conditions before the executor can release the gift. So long as those conditions are possible to fulfil, and do not violate the rule of law, or are contrary to public policy, then a court is likely to uphold a conditional bequest.
Ensuring conditions are unambiguous
When creating a contingent interest under a Will, it is imperative to ensure a suitably qualified estate planning lawyer drafts the terms of the Will carefully. If terms are ambiguous, the conditions in the Will may not be able to be achieved and the condition could be challenged.
Commonly used conditions in Wills
Each family is unique, and a Will should reflect the personal nature of an individual’s assets and family structure. Here are some examples of conditions that may be appropriate to use in certain circumstances:
- Stipulating gifts can only be received by beneficiaries when they reach a certain age, such as children turning 18
- Stipulating that a beneficiary cannot inherit an asset until they have accomplished a particular milestone, for example, until they have graduated
- Stipulating that the inheritance of real property must be used for a certain purpose, for example, that the property must be used as an art studio
Alternative options to a conditional bequest
When you have a complex family scenario, setting up a testamentary trust may be the best way to protect your assets and ensure they are distributed according to your wishes. Testamentary trusts are discretionary trusts established in Wills that enable the trustee/s to decide which of the nominated beneficiaries (if any) may receive the benefit of the distributions from that trust for any given period.
There are significant advantages to incorporating testamentary trusts in Wills, including:
- Asset protection if a beneficiary re-marries or enters a new de-facto relationship
- Asset protection where a beneficiary is facing insolvency and third-party credit claims
- Asset protection for children and other beneficiaries who are vulnerable
- Savings on income and capital gains tax
- Preservation of government benefits
Setting up a testamentary trust may not suit everyone’s family situation and asset structure. For this reason, it is imperative to obtain estate planning advice from an experienced estate planning lawyer to ensure you put in place the best strategy to suit your unique circumstances.
Some of the disadvantages that may arise in setting up a testamentary trust can include succession issues, additional administration costs, and the impact of pension eligibility for beneficiaries.
How can Attwood Marshall Lawyers help?
Attwood Marshall Lawyers is an experienced estate planning law firm with one of Australia’s most prominent and accomplished Wills and Estates teams. We take a holistic approach to estate planning and ensure our clients get a personalised service that considers their unique circumstances and specific wishes. Our estate planning lawyers will look at what assets there are and how they can be structured to ensure the wealth you have accrued throughout your life, goes to whom you intend and how you intend, after you pass away.
We are also able to provide sound advice if you have beneficiaries with a disability or who are particularly vulnerable to ensure these factors are considered as part of your overall estate plan.
To discuss our estate planning services or to make an appointment contact our Wills and Estates Department Manager Donna Tolley directly on 07 5506 8241, mobile 0423 772 555 or email dtolley@attwoodmarshall.com.au
You can also book online instantly by clicking here and booking through our website.
Read more:
The simple process to get your Will done – It’s as easy as 1,2,3!
Keeping your hard-won assets in the family – family trusts and ensuring assets transfer to the next generation
Understanding assets that you cannot leave to your beneficiaries in your Will: How to ensure your assets go to who you want them to!
Estate Planning 101 – what is ‘estate planning’? What you need to do to put a plan in place to protect your estate and your family
