In my last post I talked about the different ways you can treat an early (lifetime) gift to a child. Assuming you decide to treat the gift as an advancement, the next question is: how do you memorialize this fact?
I think the best thing to do is to have a written agreement. In it, you make reference to the amount of the gift and the fact that the gift is intended to be an advancement. You (the gift giver) sign the advancement agreement, and so does the person receiving the gift. This is a sort of “belt and suspenders” approach, as Illinois law (Section 2-5(a) of the Illinois Probate Act) states that a gift is not an advancement:
… unless so expressed in writing by the decedent or unless so acknowledged in writing by the person to whom the gift was made
Call me silly, but I like a writing AND an acknowledgement (even though the law seems to require only one or the other). I also like to make everyone (other family members, and your executor or trustee) aware of the advancement, by providing them with copies of this agreement. This also guarantees that the agreement can be found upon your death (I also recommend leaving a copy with your other original estate planning documents, in your safe or safe deposit box).
Listing the value of the advancement is also consistent with Section 2-5(b) of the Illinois Probate Act:
If the value of the advancement is expressed in the writing made by the decedent or, if not so expressed, in the written acknowledgment by the person to whom the advancement was made, it shall be considered as of that value; otherwise it shall be considered as of the value when given.
One final note, also from Section 2-5(b):
The person to whom the advancement was made shall not be required to refund any part of it, although it exceeds his share in the entire estate.
So if you advanced Junior the sum of $500,000, but his share of your estate winds up to be $200,000, the executor or trustee can’t make Junior pay back the $300,000 shortfall.
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