Conditional Inheritance through Wills and Trusts

Many people often wonder what kind of guidelines and stipulations they can include in their will and trust. While it is the court’s objective to carry out the wishes and intent of a testator (person who made a will) or a settlor (person who made a trust), there are some conditional provisions that will not be upheld by the court. Certain conditional provisions that are not honored are those that go against public policy. Such conditions may negate or limit a person’s inheritance if they marry a person of a certain age, religion, or race.  Likewise, rules that surround whether a person divorces and their eligibility for an inheritance, that would otherwise be bestowed to them, is also often invalidated by the court. Another condition that goes against public policy, is a stipulation concerning a recipient’s religion. Such conditions will not be honored if it keeps a beneficiary from receiving an inheritance otherwise left to them.

Furthermore, in light of public policy, although it is uncommon you cannot include an illegal condition or purpose for the gift. This would invalidate either all or part of the will or trust. For example, if you live in a state where marijuana is not legal you cannot bestow land for the purpose of growing marijuana. You can also not incite illegal actions, such as “To Tom, so long as he drinks his first beer before 21 years old.”

Additionally, any rules that would violate rules against perpetuities would not be upheld. Although it is not a simple concept, in short, the rule against perpetuities provides that certain future interest must vest, if at all, within 21 years after the death of a life in being at the time that the interest is created. The purpose of the rule is to prevent a person from drafting any kind of transfer agreement that would control the ownership land for an excessive period of time after one is deceased.

You can include conditions in wills and trust that surround age, education, or (legal) purpose. For example, the trust that my grandmother left me, and my siblings stated that we could not have access to our portion of the trust until we each respectively reached the age of 25, unless for educational purposes. Other examples of conditions that are upheld by the court may include “to Gabrielle so long as he uses the property as a dance studio” or “To Mark, if and when he graduates from college”.

However, it is important to keep in mind that it is more common for gifts/ assets to be distributed through trust rather than wills, considering the nature of wills. Assets from wills are generally distributed soon after death. As such, it is most common for inheritance from a will to be given based on the circumstances at the time. Whereas with trust, they are developed and equipped to hold assets for an extended period of time.

It is also critical to keep in mind the efforts and actions that the executor (person who carries out the terms of the will) or trustee (the person in control of the trust) will have to do in order to manage assets until the set conditions are met. Be specific and think through the reality and various occurrences that may take place. Consider fees and expenses that may incur during the potential timeframe where the assets are in waiting. Establish terms to handle the assets if the conditions are never met or not met within an established period of time. In this scenario, the designated beneficiary may never receive the assets, which may then be distributed to a contingent beneficiary or charity.

When conditional provisions are not well thought out and articulated in a will or trust it creates ambiguity. Such vagueness opens the door for all kinds of litigation between the beneficiary and executor or trustee. This frustrates one of the primary purposes of a will and trust, which is to clearly identify one’s wishes and intent to provide their family and loved with peace of mind without having to guess and fight over assets.

Figuring out the right amount of information to put into a will or trust can be confusing and is a delicate topic. Although courts are not favorable of contingent will provisions, their main priority is to honor the will or trust maker’s intent as best as possible and within the bounds of the law. The attorneys at The Curry Law Firm are here to ensure that your intent is clearly written within the most suitable document and carried out at the proper time. We provide guidance and establish an estate plan that meets your specific situation. If you or a loved one is thinking about drafting a will or a trust, the attorneys at The Curry Law Firm are here to help.

Estate Planning Needs in the Midst of COVID-19

Estate planning is always important, but a global pandemic definitely accelerates the need to have one today. COVID-19 has forced us to face the reality of our own mortality and consider several “what ifs” that were previously never considered, or just situations that nobody ever likes to think or talk about. Such what ifs involve physical incapacity and even death. To ignore these events as if they could never happen, is a pretense that we cannot afford, and it is better to be prepared than to not. Most people think only the elderly need an estate plan, but in fact we all do – single, married, divorce, parent, sibling, homeowner, business-owner, and the list goes on.

More than 5,000 people have died in the United States within a two week span due to COVID-19. Unfortunately, this number is only going to increase. And although we take the utmost safety precautions, this virus is still spreading and impacting the lives of many.

Do not take your health for granted or think that your tomorrow is guaranteed. It is important to consult with an attorney to determine the specific needs for your estate plan, but at a minimum it should the following:

  • Last Will and Testament: This document allows you to control how your estate will be distributed when you pass away. It provides your family with peace of mind in knowing how and to whom you want your assets allocated. A will also establishes who should be responsible for managing the affairs of your estate, and this person is designated as the Executor.
  • Financial Power of Attorney (POA): This is also known as a Statutory Durable Power of Attorney and this person is appointed to represent your monetary assets and interest. This person will be able to act in the event that you are unable to, so long as you are still living. The decisions that they make are binding as if you made the decision yourself.
  • Medical Power of Attorney: This document authorizes someone to make medical decisions on your behalf. This person is only able to step in as a medical agent if it is determined by your doctor that you are incapable of making such decisions, or you are unable to communicate your wishes, for example if you in a coma.
  • Health Care Directive: This is also commonly referred to as a Living Will. Here will you state what decisions you want to be made in the event that you are unable to speak or communicate for yourself. It is a written document that expresses your wishes about your health care in the event you are diagnosed or suffer with a terminal condition, irreversible vegetable state, or end stage condition. It also makes your organ donor status known and provides your wishes concerning any other health directives that you wish to control.
  • HIPPA Authorization: This authorizes medical staff and insurance agencies to share your medical history and HIPPA protected information with the designated person. It is important that your Medical Power of Attorney be listed so that they will be well informed of your medical history when making decisions on your behalf.
  • Guardianship for Minors: This is important to have if you are a parent or guardian of a minor(s). A guardianof a minor is a person that has the powers and responsibilities of a parent concerning the child’s support, care, education, health, and welfare. A minor is any child under the age 18 years old.

When selecting people to fulfill these roles and act on your behalf it is important to choose people who are responsible and wiling to act in your best interest. For medical concerns it may also be important to select someone who lives in close proximity to you, in the event they need to meet with doctors to discuss your medical options.

If you already have an estate plan, then that is great. However, you should review it every two years to account for current assets, as well as the current status of relationships. All estate plans require ongoing maintenance.

It is also imperative to review and update as necessary beneficiary designations on retirement accounts and life insurance policies. Holders of these accounts should be able to change beneficiaries online.

The Curry Law Firm LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

 © The Curry Law Firm

COVID-19 and Contractual Obligations : Tips for Managing Risk and Liabilities during a Viral Pandemic

As the world adjust to the outbreak of the new COVID-19 virus, businesses and individuals have been and will continue to be impacted. From production to performance, many companies have become unable to fulfill contractual obligations, as a result of supply shortage, city closures, and lack of labor due to safety precautions. As such, these companies are left wondering what legal remedies and recourse they have with respect to business affiliates.

As with any contractual manner, it is going to come down to what was contracted and mutually agreed upon by both parties. In this instance, we have to put the spotlight on the contract’s force majeure clause. A force majeure clause excuses one or both parties for nonperformance under a contract when certain events, as detailed within the clause, occur.  These events are often outside of the party’s control and severely impact their ability to meet the terms of the agreement. Many businesses have asserted that COVID-19 has impacted their ability fulfill their contractually obligations, and as such they should be absolved of any financial or legal responsibility. While business may be restricted because of this global health crisis, a pandemic does not automatically give rise to a valid force majeure defense under every contract and every circumstance.

To determine a business’ rights, obligations, and remedies, when they are unable to perform or meet the terms of an agreement the non-conforming party should consider the following:

Has there been a Force Majeure Event under the terms of their contract?

To determine contractual intent and if an force majeure event has occurred, first look at the specific list of events that are included within the clause that would release a party from their responsibility. Although each clause should be tailored to fit the specific purpose of the contract, most clauses include an act of God as a force majeure event. Many would think that a global pandemic would fall under this category, but that is arguable because of the varying definitions by jurisdiction and the principle of sole causation.  The act of God reference as it relates to a viral pandemic is different from other occurrences, such as flood, because here the parties have to determine if it is the virus itself that precluded performance or people’s response to the virus that precluded performance. Whereas, when there is a flood and a facility is now damaged or roads are not drivable, that is a clear act of God where the flood is in fact the sole cause for lack of performance. The act of God provision may cover this instance, but it is always best to have an event specifically included. Having a clause that explicitly references epidemics or pandemics would be most beneficial.  However, prior to COVID-19 this event was rarely included in contracts outside of the health industry. Other events that may be listed and at play as a result of COVID-19 are government order or authority (i.e. A mayor implementing a Stay Home Order) and national or regional emergency.

Furthermore, many force majeure clauses include a catch-all provision. However, the catch all provisions are only applicable for unforeseeable events and those that are similar in kind to the other events included in the clause. For example, if the list includes “riots, fire, strike, and any other event” , the “any other event” would not extend to government order or pandemic outbreak, because they are not like in kind to the examples provided. “Other events” cannot be greater or superior in quality, or different than the specifically detailed terms within the clause.

However, even if your contract does not specifically include these events or a force majeure clause there may be some recourse for nonperformance. Outside of force majeure we may see companies finding remedies based on the underlying doctrine of frustration of purpose, impossibility, and commercial impracticability. If not included in the contract itself these principles may be implied and applicable under applicable state contract law.

When do you invoke the force majeure clause?

Many contracts with a force majeure clause will include some level of interference that a party must experience before invoking the impact of the force majeure under the terms of the agreement.  Guidance on when to invoke the clause varies across contracts, but again first start with what the contract actually says. Some common points of invoking are when the party is prevented or hindered from complying, or when the act becomes:

  • Illegal;
  • Impossible;
  • Impracticable; or
  • Not reasonably possible.

There are many factual considerations that drive this analysis and its applicability. One must assess what their obligations are and to what degree, if any, they can they reasonably comply. For example, if you have a planned event with attendees of more than 10 people, that may now be illegal, as well as not reasonably possible, based on recent governmental authority and order.  Yes, you could still have the event for just 10 people, but that would not be reasonable and pulls on the underlying doctrine of frustration of purpose.

Is notice required?

As with all other terms of the contract, the notice requirement of a force majeure is going to vary depending on what was contracted. This notice alerts the other party of your nonperformance and why.  Failure to give notice as instructed could negate a party’s right to assert a force majeure defense for failure to comply with the terms of the contract.

Some common provisions concerning proper notice include:

  • Within “x” days of an event of force majeure;
  • Reasonably prompt;
  • Promptly;
  • As soon as practicable; and
  • Immediately.

These different formulations of notice are significant as they connect to a business’ legal strategy, what event led to the party claiming force majeure, and when did that event start. As this relates to COVID-19 there are many recent events that could give rise to a force majeure event.  Such events for considerations include, the travel ban, restrictions on gatherings of more than ten people, statewide emergency, or other event. It is important for a business to understand its legal rights and implications when asserting the event of force majeure, proceeding with notice within the proper timeframe, and then canceling with any other affected parties. This sequence of events matters to curtail any counter defense that may arise to negate that the alleged force majeure is not in fact the actual reason for nonperformance.

Final Thoughts

 Force majeure clauses do provide some contractual relief for parties that are unable to perform. However, it is important to clearly define the event of force majeure, invoke it timely, and provide proper notice. Furthermore, if a contract does not have a force majeure clause there are other options of recourse, but still communicate with the other party and provide notice for any inability to perform. It is likely that this global health crisis will impact the judicial analysis of force majeure clauses. Going forward the law and contracts will be written with COVID-19 as hindsight 20/20. But for those with current contractual obligations it is important to stay abreast of your legal rights and remedies. If you are unable to perform contractual obligations, please review your contract for possible relief and act timely. Mitigate damage if you can and consult with an attorney as soon as possible to ensure that your rights are protected, and remedies properly executed.

The Curry Law Firm LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

© The Curry Law Firm