Contingent gifts in wills

Many individuals include gifts in their wills that require an event to happen or an action to take place prior to a beneficiary inheriting (this is called a contingent gift). For example, a will may state that £10,000 is paid to every grandchild on attaining 21 years – which means that if a grandchild does not survive to his/her 21st birthday the gift will lapse (fail). The problem with contingent gifts is that they add complexity to wills and, sometimes, create difficult if not impossible conditions for potential beneficiaries to meet.

The recent case of Naylor v Barlow [2019] EWHC 1565 (Ch) is a case that highlights the complexities caused by contingent gifts, especially when an original beneficiary has died and substitute beneficiaries need to perform the conditions listed in the will in order to inherit.

The Case

As a brief summary of the case: Mr Hine (the Deceased) was survived by four children. One child, Philip, had died before the deceased but was survived by his daughters: Judith and Janet. The Deceased’s will stated that his farming partnership was to pass to Philip and another child on the condition that they pay the Deceased’s other two children £15,000 within 9 months of the Deceased’s death. Judith and Janet were only made aware of this condition 2 years and 9 months after the Deceased’s death.

The court was asked to decide whether:

a) Judith and Janet were able to inherit the interest in the farming partnership in Philip’s place, and
b) If Judith and Janet had to pay the money to the Deceased’s other children within the 9 months following his death?

S. 33 Wills Act 1837 states that if a child (or remoter issue) predeceases you then their children can inherit any gifts made to them, unless you have stated that you do not want this to happen in your will. In this case, therefore, the court confirmed that Janet and Judith could inherit in Philips’ place.

Next, the court needed to decide whether the condition – paying the money within 9 months’ of the Deceased’s death – still applied given the substitution. As stated above, this was already an impossibility as they had no way of knowing about the condition within the set timeframe. Unfortunately for Judith and Janet, the court confirmed that ‘the substituted beneficiaries step into the shoes of the original deceased beneficiary for all purposes’ and so they had to have paid the money within the timeframe if they were to inherit. Even though this is a harsh outcome for Judith and Janet, the court confirmed that ‘ignorance of the condition is no excuse for not fulfilling it’, as stated in Williams on Wills.

Given Judith and Janet’s failure to comply with the condition, the gift to them lapsed.

What should I do if I would like to include a condition in a clause?

If you are minded to include a condition in a clause then it is important to consider whether the condition is:

1. Possible,
2. properly drafted,
3. not illegal or against public policy e.g. for example a condition imposing a restraint on marriage, and
4. sensible (to avoid money being held indefinitely).

In this case, if the clause had stated that the beneficiary had to pay the money within 9 months of notification of the condition then Judith and Janet may have had a chance to fulfil the condition and inherit the interest in the partnership.