Making Contingent Gifts in Your Will

Making a Will is essentially making a plan for the future. Whilst your Will only takes effect after you’ve gone, the provisions of your Will can make a huge difference to the lives of the loved ones who survive you. It instructs your executors on how you wish your estate to be divided and whom you wish to benefit from it.

However, like all plans for the future, events in life can upset your original intentions. This means, ideally, your Will should make your intentions clear in a range of different circumstances.

A common way of doing this is to include ‘contingent gifts’ in your Will.

Contingent gifts

You’ve probably heard of a contingency plan – a ‘Plan B’ intended to take over in certain situations (usually when Plan A has gone wrong!).  A contingent gift in a Will is similar. It is a gift which only takes effect if a certain condition, ‘the contingency’, is met.

An example would be leaving a gift to someone upon them reaching the age of 21. That person will only receive the gift if they attain that age.

You can also use contingent gifts to create a form of prioritised list of beneficiaries for certain assets. For example, you might feel very strongly that certain people should receive your collection of antique soup spoons and state in your Will something roughly like:

‘I give my collection of antique soup spoons to my friend Campbell Baxter, but if he dies before me, I give them to my niece Heidi instead’

For Heidi, receiving the gift of spoons would be contingent on Campbell Baxter dying before the testator (the person who made the Will) did.

This can be very useful to allow for different situations which may occur. When your executors come to follow your Will, it still then provides a clear indication of your intentions.

When gifts fail

Contingent gifts, as well as more straightforward gifts in Wills, can fail for many reasons. Some examples would be:

• The intended beneficiary of the gift has already died.
• There is uncertainty over who is the intended beneficiary.
• Where the gift refers to specific assets and these are no longer owned by the person making the Will at the time of their death.

Contingent gifts can also fail if their contingency or condition is not met.

What happens if a gift fails will depend on the circumstances and the provisions of your Will. However, usually a failed gift will go back into your ‘residuary estate’.

Your residuary estate is essentially everything left over after all the gifts, debts, tax, expenses, etc from your estate have been dealt with.

For a failed gift to fall back into your residuary estate is not necessarily a bad thing; the beneficiaries of your residuary estate will receive the gift instead, and you might be perfectly happy with this as an alternative. Going back to the soup spoon example above, if Heidi was the residuary beneficiary, there might be no need to make a contingent gift in her favour. If the gift to Campbell Baxter failed, the spoons would go into the residuary estate which she would then inherit.

The potential pitfalls of contingent gifts

Your Will should always specify what will happen to your residuary estate. Whilst it is possible to make a contingent gift of the residuary estate itself, it has to be very comprehensive to avoid uncertain situations from arising.  A recent case showed just how problematic this can be.

The case of MacIntyre v Oliver [2018] EWHC 3094 (Ch)

The case involved the trustees of a number of trusts set up under a Will asking the court for guidance on how certain passages of this Will should be followed.

Violet Hamblen-Thomas’ Will provided that her estate should be held on trust for her son Edwin during his lifetime and, when he died, it should be held on trust for any of Edwin’s children who reached the age of 21.

The Will also provided that:

“In the event of [Edwin] dying without leaving children as aforesaid my Trustees shall hold my estate […] on trust for the said Enid Simpson absolutely but should she predecease me then on trust for the said Victoria Wallis absolutely”

Enid Simpson was a close friend of Violet and Victoria Wallis was Enid’s daughter.

On the face of it, these contingent gifts sound perfectly reasonable; the estate was to be held for the benefit of Edwin during his lifetime and when he died it should be held for his children. If Edwin died childless, the estate should be held for Enid instead, but if she had died before Violet, it should go to Victoria.

However, the more you consider the provisions, the more cracks appear. They do not allow for every possibility, and as events turned out, Violet’s wishes became unclear. Furthermore, these provisions dealt with Violet’s residuary estate, so there was no ‘fallback’ beneficiary who would inherit if the failed specific gifts.

Violet died in 1973, survived by Edwin, Enid, and Victoria. In accordance with the Will, her estate was held on trust for Edwin.

Enid died in 1998 and, in 2014, Edwin died without leaving any children. This led to the issue at the heart of the case, which the trustees needed help with: was Victoria entitled to receive the estate through the contingent gift?

Only one of the conditions had been met: Edwin had died childless. Enid, however, had not died before Violet.  Enid had also died before Edwin.

In deciding the matter, the court referred to a case dating back to 1711 – the case of Jones v Westcomb. This case established a principle whereby, if a contingent gift fails due to an eventuality which is not provided for, in limited circumstances the court can anticipate the likely wishes of the person who made the Will.

In Violet’s case, the court found that her relationship with Enid had been very close and Violet had been appointed Victoria’s godmother. As such, the court was “satisfied that had Violet been asked what should happen to the [residuary estate] if Enid died before Edwin and he had no children she would have said that it should be left to Victoria.“

The court ordered that the estate should therefore be held for Victoria and, crucially, not pursuant to the Will or intestacy of Edwin.

Why is this significant?

Ultimately, Victoria received the residuary estate, which the court considered was exactly what Violet would have intended. However, the court’s intervention undoubtedly caused Violet’s estate to incur considerable costs of time and money.

Had Violet’s Will been more comprehensively drafted, this uncertainty could have been avoided. The Will simply did not provide for all possibilities – and one of these possibilities actually went on to happen.

It is not the only situation which could have caused uncertainty either. Suppose Edwin had had children, but they had not lived to the age of 21, would the gift to Enid or Victoria still have taken effect? After all, if Edwin had died before his children he would not have died ‘childless’.

When making any contingent gifts, especially if they involve your residuary estate, you must ensure that it allows for every conceivable possibility so that your intentions are clear and your executors, family and friends can be certain of them.

This might sound impossible given how unknowable the future is, but there are steps you can take:

• Instructing a specialist Wills and Probate solicitor to draft your Will. Knowledge and experience are crucial to a well-drafted, future-proofed Will. This is not something you can call upon when using an inexperienced Will-writer or making your own through a DIY Will kit.
• Keeping your Will as up to date as possible to match your circumstances.

Can Roche Legal help you?

At Roche Legal, we are reassuring experts specialising in:

• Wills
• Probate and Estate Administration
• Contested Probate and Will Disputes
• Powers of Attorney
• Court of Protection
• Trusts and Tax Planning