Getting an Advancement on Your Inheritance: Will and Trust Law
In inheritance law, an "advancement" or "advance" is just as the name indicates, an advance payment made on your inheritance. An individual who expects to inherit money or property from someone when that person dies may ask for an advance on a portion of that inheritance before the benefactor's death--sort of like a paycheck advance from your employer.
Heirs who receive advancements can create tricky situations when a person dies and his/her estate is parceled out to the remaining heirs. The executor of the will or the trustee must take such advancements into account when distributing the assets so that the estate is divided fairly and in accordance with the deceased's wishes.
Common Legal Questions Regarding Advancements and Inheritances in General
What is advancement?
A person doesn't have heirs until after his death. Before he dies, individuals who may stand to inherit after his death are called prospective or potential heirs. Such potential heirs can ask the soon-to-be-deceased individual for an advancement on their expected inheritances, but the individual has no legal obligation to give them such an advancement, since one only becomes an heir with a legal claim on the assets after the individual's death. Most states only consider a lifetime gift to be an advancement on inheritance if an individual makes that gift to a lineal descendant (children, grandchildren, etc.), not to an ancestor (parents, grandparents, etc.).
What is considered an advancement?
In the past, common law presumed the in absence of evidence proving otherwise, a lifetime gift to a relatives constituted an advancement on his/her inheritance. However, our laws have evolved and this is no long the standing assumption. Some states do not presume that a lifetime gift is an advancement. Other states, following the Uniform Probate Code, require a written statement from the heir or the decedent explicitly stating that a gift was intended as an advancement on the inheritance.
How are the assets equally distributed when there are advancements?
Common law assumes that an equal distribution of inheritance includes all property, including that given by advancements. Therefore, once a gift is proven to be an advancement on inheritance, the law allows the executor of the will or trustee to consider that advancement as part of the recipient's inheritance after death. When the executor considers the full amount of property to be inherited equally by multiple heirs, any advancement those heirs previously received will be considered in deciding the remainder of the money they will receive.
Suppose your parents give your brother $50,000 before they die and it is formally stated to be an advancement. When your parents die, they have $100,000 in assets left to distribute. The executor will consider the full amount of the inheritance to be $150,000 to be divided equally between you and your brother, i.e. $75,000 each. Since your brother already received $50,000, he will only get $25,000 from the $100,000. You will receive $75,000.
At death, people's assets are often less than what they expected. For instance, suppose you are one of 4 prospective heirs and receive a $10,000 advancement on your inheritance. But as it turns out, your benefactor leaves only $15,000 upon his death. Each heir would be due ($10,000+$15,000)/4 = $6,250. But you already received $3,750 more in your advancement than you were actually due. The good news is that you don't have to return any of your advancement. In light of the fact that you already got more than you deserved, the remaining $15,000 will be distributed among the other 3 heirs. They will get $5,000 each and you will not receive any more. (However, if you want to avoid bad blood, you might dole out your extra inheritance to make things fair.)
Example of Inheritance Dispute Involving an Advancement
In the two examples above, the advancements given were explicitly stated to be advancements, so there was no dispute to resolve when the deceased's estate and assets were distributed. Now let's consider a stickier situation.
Before your father died, he gave your sister $60,000 but it was never stated whether this was an advance or not. When your father died, he left behind $120,000 in assets.
You and your brother claim that this should be split two ways between the two of you so that you each get $60,000. Your argument is that your sister already got her share of her inheritance in the form of that $60,000 gift your father gave her before he died.
Your sister says the assets should be split three ways so that you each get $40,000. She claims that the $60,000 she received before your father's death was not an advance. Moreover, your father paid for your medical school tuition and your brother's law school tuition, which amounted to more than $60,000 apiece, while she on the other hand did not receive any financial assistance for her two-year degree.
Who's right? Your sister, or you and your brother? This is a case for a judge to decide. If your sister's claims are true, that you and your brother received financial assistance that totaled more than her gift, a judge might decide in her favor and order the amount to be split three ways. But what if both you and your brother repaid your father? Or what if your sister had to go to a drug rehab program that cost tens of thousands of dollars and your father paid for that as well? What if your sister frequently got in trouble with the law and your father always paid her legal expenses?
In a tricky case like this, a judge may consider all your father's financial assistance over the years to be advances on your inheritances.
Should you ask for an advancement?
If your parents are wealthy and you need money, one way to convince them to give it to you more readily is to agree that it will be an advance on your inheritance. But be prepared to receive much less than your co-heirs when your parents pass away and the estate is divided. You will have a much harder time contesting a will if you have received an advance.
What Can Parents and Grandparents Do to Prevent Disputes When They're Gone?
In simple terms, if you're wealthy and have a lot of assets to distribute to your children and grandchildren, you need to make your wishes as clear as possible while you are living. You must make it clear whether lifetime gifts and financial assistance you provide over the years are to be considered inheritance advancements, and crucially, you must keep all your potential heirs in the loop so they are not caught by surprise. Inheritance disputes are not so much about the money as they are about airing grievances and working out feelings of betrayal.
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