A recent ruling from the Massachusetts Supreme Judicial Court has redefined the rules around engagement rings and could have broader implications for estate planning. The court ruled that if an engagement ends, the engagement ring should be returned to the person who gave it, regardless of fault. This breaks from Massachusetts’ older approach, where fault in the breakup played a role in whether the ring was returned. For estate planners and individuals looking to manage their assets, this decision serves as an interesting case study on “conditional gifts” and estate planning strategies.
The Case: Bruce Johnson vs. Caroline Settino (click here to view the Court’s decision)
In Bruce Johnson vs. Caroline Settino, the Massachusetts Supreme Judicial Court addressed the question of who retains the engagement ring after an engagement is called off. Traditionally, Massachusetts courts examined “fault” to decide who kept the ring, viewing it as a gift given on the condition that the marriage would take place. If the person who received the ring ended the engagement, the ring was typically returned. Now, however, the court has ruled that fault is irrelevant: the ring should be returned to the giver if the marriage does not occur.
This case highlights a unique category in gift law — conditional gifts. A conditional gift, unlike most gifts, carries terms that must be fulfilled for the gift to be finalized. Here, the engagement ring is tied to the marriage; without the marriage, the gift is “undone” and the ring returns to the giver.
While this case has been reported by news outlets (click here for an example from WCVB), I think this case is more interesting when considered in light of the law of other types of gifts.
How This Differs from General Gift Law in Estate Planning
This ruling challenges a foundational principle in estate planning: gifts, once given, are typically irrevocable. When you gift a piece of property, money, or valuable item, that gift is usually considered final and cannot be reclaimed, which is central to estate planning.
For example, if you gift a piece of property to a family member, that property is now theirs to manage and use as they see fit. This rule helps bring certainty and finality to estate plans. However, Bruce Johnson vs. Caroline Settino shows an exception — conditional gifts. When specific conditions are attached, the gift may be revoked if those conditions are not met.
What This Means for Estate Planning
If you’re considering making a gift but want to retain some level of control over it, there are strategies in estate planning to consider. For instance, trusts allow you to transfer assets with conditions that govern how and when beneficiaries can access those assets. Through a trust, you can stipulate conditions without needing to worry about the legal concept of irrevocability that normally applies to outright gifts.
For example, a revocable trust enables you to set terms on how and when an asset is distributed while also retaining the ability to adjust or revoke those terms during your lifetime. Another option is an irrevocable trust, which offers added benefits for asset protection and tax planning, though it limits your ability to make changes later.
Key Takeaways
- Engagement Rings as Conditional Gifts: Under the new ruling, engagement rings are classified as conditional gifts, meaning they must be returned if the condition (marriage) is not met.
- Understanding Gift Types in Estate Planning: Most gifts are irrevocable in estate planning. However, trusts offer a flexible way to transfer assets with specific conditions, avoiding the need for “conditional” gifts.
- Implications for Your Estate Plan: When planning for the future, consider whether you want certain conditions around your gifts and how a trust might help achieve that. Understanding the distinction between outright gifts and trust-based gifts can be a powerful tool in preserving family wealth and maintaining control.
Conclusion
The Massachusetts Supreme Judicial Court’s decision on engagement rings is an eye-opening reminder that not all gifts are created equal. For those planning their estates, it’s worth considering the types of gifts and structures that align best with your goals. Conditional gifts may be an exception to the general rule, but trusts offer a path to structure your wishes while safeguarding assets.
If you have questions about estate planning, conditional gifts, or setting up a trust, I’d be happy to discuss how to make your plan work for you. Feel free to reach out for a consultation and take the next step in securing your future.
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