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Friday, November 29, 2013

When Is a Gift an Advancement on Inheritance?

Envision an unfortunate scene after your passing.  Your three adult sons are bickering about the inheritance each expects to get.  You had given your eldest son a $10,000 check a few years ago to help him out of a financial jam.  Now, the middle and youngest sons claim the eldest should get $10,000 less from your estate.  They argue that the only logical conclusion is the $10,000 had been an advancement against the eldest son's future inheritance.  The eldest disagrees.  He believes all three sons are due to share equally in the distribution of your estate.

Who's right depends on whether you died "intestate" and anything about the subject had been written down by either you or the eldest son. 

If you died "intestate," meaning without a Will or Trust, then the gift could only be an advancement on inheritance if one of two things had happened: 

  1. You (i.e. the "donor" or gift-giver) declared in a contemporaneous writing that the gift was an advancement (or that the gift would be used in computing the post-death distribution of your estate); or,

  2. The eldest son (i.e. the "donee" or gift-receiver) acknowledged in writing that the gift was an advancement (or that the gift would be used in computing the post-death distribution of your estate). 

Note there's no requirement for the donee or gift-receiver’s written acknowledgment to have been contemporaneous.  That's because the donee's written acknowledgment is  a statement against self-interest. 

It’s worth emphasizing that a contemporaneous writing by a gift-giver is one that occurs at or very near the time a gift is given.  In other words, nobody should expect a court to honor a written declaration that states, “The gift I gave my eldest son last year had been meant to be an advancement on his inheritance.”  Sorry, a year's lag time is too much to be considered contemporaneous. 

Okay, we've just covered how it’s determined whether someone who died intestate had given an advancement on inheritance instead of an outright gift.  On to the next option.

If you died leaving a Will or Trust, then the terms of the Will or Trust document would govern.  Generally, no discussion of the subject in the Will or Trust document would translate to no lifetime gift being treated as an advancements against inheritance. 

Whether you die with or without a Will or Trust, the key take-away remains this—if you want all gifts or only selected gifts given during your lifetime to be counted as advancements against the gift-receiver's inheritance, then it's best to say so in writing at or very near the time the gift is given.   

Author Jim Cramp is the founder and principal attorney at the Cramp Law Firm.  The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region. 


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