Making A Pre-Inheritance Advance? Document It!

Posted: Apr 29, 2019

By: Washington State Estate Planning and Probate Lawyer Andrew M. McKenzie

For various reasons, testators frequently distribute portions of their estate to their kids, heirs, and loved ones before they die.  Reasons can vary from reducing or avoiding taxes to simply recognizing an heir’s greater need for financial help in the moment.  Questions often arise later concerning how the distribution should be characterized, such as: Were the distributions gifts, loans, or advances to be deducted later from an inheritance?  Naturally, the recipient of the distribution would usually prefer for the distribution to be characterized as a gift, whereas the other heirs of the testator would prefer that the distribution be characterized as a loan or advance on the recipient’s inheritance.  Failing to document pre-inheritance payments may expose your estate to future conflicts.  By clearly documenting advancements you can help protect your estate from these potential conflicts.

The general presumption in Washington is that payments made to one’s child (whether a minor or an adult) are gifts, but this presumption may be overcome by clear and convincing evidence.  Therefore, a testator who does not intend a payment as a gift, should document advances on an heir’s inheritance as clearly and unambiguously as possible.  Courts have upheld notations on payment checks as being persuasive evidence to show the payor’s intent.  Presumably, acceptance of the notation by the recipient at the time the check is cashed evidences the recipient’s acquiescence in the payor’s characterization of the payment.  When making a will or amendment which post-dates gifts or advancements already made, it may also be helpful for the testator to recite the character of the distributions in the will.  However, a recitation of an advance after the fact (versus a gift) may not be enough to overcome donative intent where the recipient claims the payment was a gift and the payor did not document the distribution as an advance or loan contemporaneous with the payment.

Battles over a testator’s intent are not uncommon and can create or widen lasting rifts between heirs of an estate.  Consulting an estate planning lawyer can greatly mitigate the likelihood of disputes between loved ones after you pass.  The lawyers at Beresford Booth hold extensive experience in estate planning, as well as in probate and estate litigation.  We would be pleased to sit down with you and make sure you take the correct steps to protect your loved ones and your estate.

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