What is the legal procedure for a testator to give an advance to a beneficiary for a portion of their inheritance? In this case, the niece of the testator is named as a specific beneficiary in the will, but is very short on money and the testator has offered to advance them some of the money that they will inherit when the time comes. I am the executor named in this will and want to make sure that this advance is properly documented so that it won't complicate my life down the road. Would a signed statement from the testator indicating the date/sum of money/fact that it is an advance on the amount specified in the will be sufficient? Or is anything more required?
It's great that everyone in this situation appears to be working together. That's more rare than you know. I completely agree that the advance should be properly documented. This should, as you say, prevent your life as executor from being harder than it has to be. After the testator passes away, it will also give clarity to other beneficiaries of the will about what is going to happen. It will give reassurance that the testator's wishes are being properly carried out.
There isn't any particular form or notice required to be prepared. The signed statement you mentioned would be sufficient. Make sure that the note is clear that it's an advance, not a loan or a gift. It doesn't need witnesses. It would be a good idea to keep the statement with the will.
An issue to keep in mind is that of mental capacity of the testator. You haven't mentioned it or the age of the testator. The testator should understand the nature of the transaction, and understand how it impacts his or her current financial condition. In other words, the testator shouldn't be giving away money he or she can't afford to give. If there is any question of capacity, the person to assist the testator is not the executor but the person appointed under the Enduring Power of Attorney.
One final note. Make sure that the will does not say that advances are not to be taken into consideration when the estate is divided. This would directly contradict the statement signed by the testator and could end up requiring you to ask the courts for direction.
Thanks for the answer! The testator is definitely mentally capable and the sum of money involved is small relative to the overall value of the estate (though a sizeable amount relative to what the specific beneficiary will receive), so the advance itself is not a concern. I just wanted to make sure that it was sufficiently documented to avoid questions down the road.
ReplyDeleteWhich brings me back to the second part of the question that I had asked. Would the amount of the advance need to be adjusted for inflation when determining how much a beneficiary is still entitled to in the will. To be strictly fair to all beneficiaries, it seems like inflation should be taken into account as receiving the money now is obviously better than receiving the money in 5 or 10 years time.
Perhaps an example would make my question more clear. Say a will states that two beneficiaries are to receieve $20,000 each and the testator gives one of them an advace of $10,000 today. If the testator passes away 10 years from now, the beneficiaries are entitled to $20,000 each (in 2022 dollars). However, assuming annual inflation of 2%, the $10,000 advance paid today would be equivalent to $12,189.94 in 2022 dollars, so what is the balance remaining to be paid to the beneficiary that received the advance?
$10,000 (20000-10000) or $7810.06 (20000-12189.94)?
My elderly mother wants to add my two brothers and I as joint tenants to her house (so as to avoid probate costs upon her death).
ReplyDeleteI have read the horror stories posted here and your comments re not advising this yourself. My one brother (in his 50's) still lives with my mother in her house. Even if we were all made joint tenants, there could be a possibility that he would not want to sell the house upon her death, choosing to live there as he always has.
Am I correct in assuming that we could not make him sell the house?
My mother also gave him $60,000.00 to purchase his own condo (which he barely lived in and has since sold) with the understanding that said sum would come off the proceeds of the estate. Thank you for your advice re using the word "advance" and not "gift" or "loan".
Thank you also for your very, very informative site.
Hi there,
ReplyDeleteYes you are correct. The signatures of all joint tenants are required to sell the house. I can see a real problem shaping up here. Not only can the rest of you not receive your inheritance if the house isn't sold, but the set-off of $60,000 won't happen either.
Speaking of the $60,000, is the "understanding" written down by your Mom anywhere? Does she mention it in her will? Most people in your brother's situation claim that the money they received was a gift and was not meant to be repaid or set off. This could be bad in your situation because your brother would have leverage (i.e. you want him to sell the house).
A bit of tough love is needed here. Ask your Mom what's more important - saving on probate fees or setting up an estate that is fair to all the kids and won't cause family fighting.
Lynne