Sometimes, a parent will give money or property to a child or grandchild while the parent is alive. Gifts made while the gift-giver is alive are legally called “inter vivos” gifts.
When there are inter vivos gifts, questions can arise concerning whether those inter vivos gifts are to be considered to be strings-free gifts or if those gifts should be considered advances of the gift-receivers’ inheritances.
When an inter vivos gift-giver dies without a will, the gift-giver’s estate is administered through probate in a process called “intestacy.” This is often the time when the question is raised regarding whether an inter vivos gift was an advance on the gift-receiver’s inheritance.
Whether an inter vivos gift is an advance on the gift-receiver’s inheritance depends upon what the gift-giver intended.
To simplify the process of determining the gift-giver’s intention, Ohio law says that generally the only evidence that can be considered when determining the gift-giver’s intention is whether there was a written inheritance-advance intention made by the gift-giver contemporaneous with the giving of the gift.
In other words, unless the gift-giver wrote out a note while giving the inter vivos gift, with the note stating that the gift was to be an advance of the gift-receiver’s inheritance, the gift is not an advance of the gift-receiver’s inheritance.
However, alternatively, the inter vivos gift will also be considered an advance on the gift-receiver’s inheritance if the gift-receiver acknowledges in writing that the gift was an advance of the gift-receiver’s inheritance.
If an inter vivos gift is an advance of the gift-receiver’s inheritance, the value of the gift is usually determined as of the date of the gift.
For example, a mother may have given her son a house worth $200,000 in 2012. Also, the mother wrote on a paper at the time when the house is deeded to the son in 2012 indicating that the house is to be considered as an advance on the son’s inheritance.
Then, in 2023, the mother dies while the house is worth $275,000. If the son is set to inherit $300,000 from his mother, only $200,000 is the advancement amount or value — not the $275,000 that the house is worth when the mother dies.
The analysis is different if the gift-giver has a will. In that instance, the gift-giver can lay out all kinds of details in the gift-giver’s will that clarify whether any inter vivos gift is to be or is not to be an advance on inheritance.
The rules are different for people with wills vs. people without wills because the law on wills includes safeguards that decrease the possibility of fraud. Those safeguards include having two disinterested people witness the will-maker’s signature. And the law also requires that only the original will that was signed in ink by the will-maker can be relied upon in probate court.
Thus, a parent who wants an earlier inter vivos gift (without a contemporaneous writing) to be an advance on inheritance can effectuate that want through a will.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.
