How And When To Use Class Gifts In Your Estate Plan

When we think of leaving property or assets to our loved ones in our estate plan, we probably just think of naming them individually. And that’s OK. But there are times when naming people specifically isn’t possible, or when it may be impossible to know who you are leaving your property to, and thus, impossible to name them.

When Would it be Difficult?

Let’s say that you have 4 kids. They are young. As an incentive, you want to leave a little extra to any of your kids who end up graduating with a Ph.D. But how do you know who that will be? Graduation with a Ph.D. may happen when you are still around, but it may not.

What if you want to leave property to your grandchildren…but your current kids don’t have kids. Which one of them will have kids? How many? How do you leave your property to a group of people that doesn’t exist and may not ever exist?

Enter the Class Gift

The answer to all of these questions is the use of the class gift. Instead of leaving property to a designated person, a class gift describes a category or class. Anybody who meets the requirements or parameters of the class at the time that the will or trust go into effect or administered, gets the gift.

So, in our first example above, you would leave property to “whichever of my kids graduates with a Ph.D., or who has earned a Ph.D. at the time of administration,” or similar language.

Some Considerations and Concerns

There are some things that need to be considered, if you are using class gifts. One is what happens if nobody meets the class requirements? For example, again, in one of our examples above, what if none of your kids ever has kids, and thus, you have no grandchildren? Your estate plan needs to have a “backup plan,” in the event there are no members of the class.

The class has to be defined. If you leave property to grandchildren, does that mean biological children of your children, or does that also include adopted children?

Remember that when you leave property to a class, you may be leaving out their heirs. So, if you leave property to any of your kids who get a Ph.D., and they do not get that Ph.D., or they die before they can attain that goal, their kids (your grandchildren) may get nothing at all. They don’t fit the definition of the class you defined (anybody who attains a Ph.D).

And what about your kids who attain their Ph.D., but they do so long after you pass? Is your class gift determined at the time of your passing? Or is it held open for a period of time, available for anybody who meets the class requirements in the future?

Class gifts need to be clearly defined. Our examples above are clear. But what if the class was “any charity that works with wildlife?” That would be open ended, and somewhat hard to determine who gets what from your estate plan.

Call the Torrance will and estate attorneys at Samuel Ford Law today for help creating an estate plan that does what you want or need it to do for you.

Sources:

alllaw.com/articles/nolo/wills-trusts/who-gets-group-inheritance-one-member-died.html

jstor.org/stable/20787112