By Kathryn Nekola  

A common question in estate planning is whether a will can be used to leave a gift that is contingent on the beneficiary fulfilling certain conditions. The answer is: it depends.

The enforceability of conditional gifts is evaluated on a case-by-case basis. Courts in North Dakota and Minnesota will try to honor the intent of the gift, but they will not enforce conditions that are illegal or against public policy. Conditions that are against public policy include those that are immoral, encourage harmful acts, or hurt society. Courts may also determine that a condition is invalid if it impermissibly tries to control the beneficiary’s life.

Two types of conditions that are frequently the subject of litigation are those that restrict marriage and those that void a gift if the beneficiary contests the will.

Restraints On Marriage

Restraints on marriage may be either partial or general. Partial restraints on marriage, such as restrictions against marrying a specific individual or requiring a beneficiary to marry within a certain religion, are usually upheld. However, general restraints on marriage, such as those which prohibit a beneficiary from marrying anyone, are often deemed invalid as a matter of public policy. Other conditions that are often invalidated because they are considered contrary to public policy are those which encourage the disruption of a family relationship, discourage the formation or resumption of a family relationship, or seriously interfere with a beneficiary’s freedom to divorce.

For example, in Graves v. First Nat. Bank in Grand Forks, 138 N.W.2d 584 (N.D. 1965), the court invalidated a condition on a gift that required the beneficiary to divorce her husband and cease living with him. The court reasoned that a condition designed to influence the beneficiary’s behavior and encourage divorce was against public policy because it would undermine the marital union and disrupt the family. As a result, the condition was unenforceable and the beneficiary received the gift free and clear of the condition.

Conversely, courts will typically uphold a condition that does not affect a beneficiary’s ongoing behavior and does not cause a beneficiary to lose out on a gift based on any action taken after the death of the testator (individual who has made the will). In In re Est. of Feinberg, 235 Ill. 2d 256 (2009), a requirement that any beneficiary married to a non-Jewish spouse at the time of the testator’s death would forfeit their inheritance was upheld after the court determined the condition would not influence the future behavior of the beneficiaries and any future behavior would not impact the gift.  The court went on to state that a testator was permitted to reward those beneficiaries who, at the time of the testator’s death, most closely embraced his cherished values.

No-Contest Clauses

A no-contest clause is a provision in a will that threatens to disinherit any beneficiary who challenges the validity of the will. Under N.D.C.C § 30.1-20-05 in North Dakota and M.S.A. § 524.2-517 in Minnesota, a no-contest clause is void only if probable cause exists for the proceedings initiated by the contesting party. The rationale for voiding a no-contest clause under these circumstances is that it is against public policy to require a beneficiary to forgo a legal right.

This concept was first recognized in Hartz’ Est. v. Cade, 77 N.W.2d 169 (1956), when a Minnesota court held that no-contest clauses in wills are valid, but will not be enforced against a beneficiary who contests a will in good faith, even when the contest is unsuccessful. In other words, a no-contest clause will not be enforced against a beneficiary who successfully contests a will or a beneficiary who unsuccessfully contests a will, but who had a good faith basis for doing so. A good faith basis for a will contest may be a legitimate belief the testator was acting under duress when they created the will or lacked the legal capacity needed to sign the will on the date of its execution.

Conclusion

Conditional gifts can be a useful tool in estate planning. However, their enforceability is not guaranteed. Conditions that are illegal, against public policy, seek to impermissibly control a beneficiary’s life, or require a beneficiary to forgo a legal right will not be enforced. Understanding these limitations is crucial for creating an effective and enforceable estate plan.

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