Part 1: Condition Precedents

1. What is a conditional gift?

A conditional gift is a gift which is subjected to a condition precedent stipulated by the testator in his will. The donee (intended recipient) of the gift will not acquire an interest in the gift until he or she satisfies the relevant condition precedent.

2. What conditions can I include in my will?

In general, there are no restrictions on the type of conditions that you can include in your will so long as they are not against public policy, illegal or impossible to satisfy. Condition precedents cannot be too vague or too difficult for the courts to enforce.

3. What will happen if the conditions set in my will are void or unenforceable?

If conditions are or become unenforceable, the conditional gifts will fail and become part of your residuary estate.

4. What are the benefits of having condition precedents in my will?

You can retain a certain element of control by having condition precedents in your will. Condition precedents help to ensure that your assets are utilised by your beneficiaries in a way that you would approve of, as well as require your beneficiaries to meet certain criteria set by you before they inherit your assets.

5. What are some examples of condition precedents in wills?

Here are some common examples of condition precedents in wills: 

  1. Attaining a specific age: Father gives RM100,000 to Son upon the Son attaining the age of 20;
  2. Attaining an education milestone: Mother gives Daughter RM100,000 upon the Daughter graduating from university with a degree;
  3. Marriage: Mother gives Son RM100,000 upon Son’s legal marriage.

Part 2: Testamentary Trusts

1. What is a trust?

A trust is a relationship that arises where an individual (trustee) holds property for the benefit of another (beneficiary).

2. What is a testamentary trust?

A testamentary trust is created under a will and takes effect only upon the death of the testator. It is usually created to provide for the manner of distribution of all or part of an estate. There may be more than one testamentary trust per will depending on the testator’s wishes.

3. How does a testamentary trust work?

A testator will appoint an individual (or individuals) to be his or her trustee(s). The trustee(s) will be obligated to hold a certain property for the benefit of the beneficiaries upon the testator’s death according to the wishes of the testator.

4. How many types of testamentary trusts are there?

In general, there are two types of testamentary trusts:

  • fixed testamentary trust; and
  • discretionary testamentary trust. 

Fixed Testamentary Trust

A fixed testamentary trust is one in where the beneficial interests are fixed. In other words, the share of trust property that the beneficiary will receive is defined by the terms of the testamentary trust. For example, Apollo gives all his assets to Benedict on trust for his son, Christopher. 

Discretionary Testamentary Trust

A discretionary testamentary trust gives the trustee a broad dispositive direction as to the trust’s income and/or capital amongst a range of potential beneficiaries (which may include the testator’s descendants or spouse). The discretion conferred on the trustee allows him or her to respond to changing circumstances when administering the estate. An example of a discretionary testamentary trust will include, Apollo gives all his assets to Benedict on trust for his son in such shares as Benedict shall in his absolute discretion thinks fit.

5. What are the benefits of a testamentary trust?

A testamentary trust helps to preserve your assets. A normal will without a testamentary trust provision would leave assets directly to beneficiaries. However, with the creation of a testamentary trust, your trustee will still retain discretion in handling the assets in the event that your beneficiary later becomes bankrupt or encounters unfortunate events.
You can also prevent your assets from being dissipated prematurely as your trustee will have the discretion to whether your assets should be should or retained to generate future income for your beneficiaries. Testamentary trusts are ideal if you have beneficiaries who are unable to handle a lump sum benefit responsibility. This way the beneficiary’s inheritance is protected and preserved from waste and dissipation by the beneficiary.

By Prisilla Chong and Chew Jin Heng


Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.