Welcome to CPA at Law, helping individuals and small businesses plan for the future and keep what they have.

This is the personal blog of Sterling Olander, a Certified Public Accountant and Utah-licensed attorney. For over thirteen years, I have assisted clients with estate planning and administration, tax mitigation, tax controversies, small business planning, asset protection, and nonprofit law.

I write about any legal, tax, or technological information that I find interesting or useful in serving my clients. All ideas expressed herein are my own and don't constitute legal or tax advice.

What is an Advancement?

In the estate planning and administration context, an advancement is a gift made to an heir prior to death that is treated as an advance on the heir's ultimate share of the estate. For example, if dad made a $50 advancement to son during his lifetime, died intestate with $100 to his name, and had three children and no spouse, the two children that had not received lifetime gifts would split the $100 equally. The $50 is treated as an advance on the son's ultimate inheritance; otherwise, the remaining $100 would be split three ways, with the son receiving in total a disproportionate share.

Under the Uniform Probate Code, a gift made prior to death is only treated as an advancement if accompanied by contemporaneous written documentation that the gift is to be treated as such. While the concept of an advancement can only technically apply where a decedent dies intestate and left documentation of intent to treat a gift as an advancement, my will and trust form language includes a provision confirming that any prior gifts are not advancements. It is important for clients to consider the impact that providing additional support and resources to one heir during life can have on all heirs upon death.

The comments to the Uniform Probate Code provide a good example of how advancements work, which I simplify here: G died intestate, survived by his three children, A, B, and C. G’s probate estate is valued at $60, but during his lifetime, G had advanced A $50 and B $10 and memorialized in writing that such gifts be advancements. Upon G's death, the first step in calculating the children's respective shares in G's estate is to add back the advancements, resulting in a theoretical "hotchpot" estate of $120 (60 + 50 + 10), of which the three children would be entitled to equal shares.

Because A has received an advancement greater than the share to which he is entitled, A can retain the $50 advancement but is not entitled to any additional amount. This leaves $70 (60 + 10) remaining in the hotchpot estate, of which B and C are each entitled to half. B receives $25 (having already received $10) and C receives the remaining $35. Had A and B's gifts not been treated as advancements, A would have received $70, B would have received $30, and C would have received $20 from G's estate (aggregating pre-death gifts with an equal share of the remaining estate). This example illustrates why it is important to consult with an estate planning attorney prior to making substantial, disproportionate gifts to heirs.