Jan 23, 2011

Gifts to Kids as Inheritance Up Front: Write it Down

Dear Liza: How typically would you handle the following situation?  Say one of four siblings was gifted a significant amount of money while a parent is living.  The same amount of the money was not able to be given to the three other siblings.  Just not enough "liquid" cash.  It was understood that the gift was to be recognized at the time of the parent's death through the inheritance. Here's what I'd suggest. First, you have to understand that considering a gift during life as an advance on a child's inheritance is entirely up to the parents involved, not the siblings, no matter how 'unfair' that may seem. If, in fact, parents want to treat such a gift as an inheritance, then they can say so in their Wills or living trusts, asking the executor or Trustee to take such a gift into account before equalizing the shares given to each sibling. If they don't, then that gift can't be taken into account if the Will or trust says to divide what's left equally. Period. Any equalizing between siblings at that point would have to be voluntary. The big problem is with that word "understood' in your question. So often these family understanding aren't written down or documented in any way, and that's just a recipe for big time trouble. In the absence of anything written, siblings can and do sometimes end up with a family feud.