With A Declining Economy, More Parents Are Giving Their Kids “Advancements” On Their Inheritances

You’ve spent your life working hard and making sound financial decisions to make sure your family flourished. Now, some of you are lucky enough to find yourselves living out your golden years in a secure financial position. Even if it doesn’t feel like it, in terms of national averages, the mere ownership of any sort of property puts you leaps and bounds ahead of the rest of society.

You’ve raised children, prepared them for the adult world, taught them about taxes, bills, mortgages, etc, and one day you hope that they too will be able to raise a family in a nice home.

What you could not have prepared them for, however, were things beyond your control; the sky-high interest rates on the monumental, life-changing purchases that come with adulthood – specifically, on houses, cars, and raising children. This is all exacerbated by the storm clouds of the rapidly growing student debt crisis, which sent young adults off into the economy with net worths in the negative hundreds of thousands.

Your children are working, some have degrees and advanced degrees and jobs and side hustles. They’re not looking for handouts, but you can see they’re struggling.

Some parents sit back and say “welp, when I die at least my kids will have a little something”

But when you die your kids may be damn near 50!

Not to sound morbid, but why wait to give some money or property to your children until after you’ve passed away?

Clearly, they can use that money now. Why not help them out in a way where you’ll actually see the impact in your lifetime?

Take Christmas morning for example (or, in my case, those eight crazy nights of Hanukkah.) Remember the looks on your children’s faces when they opened their presents? Wouldn’t you like to experience that feeling again, now, while you’re alive?

It’s the hardest it’s ever been in America for a young person or couple to establish themselves today. Interest rates on houses and cars are prohibitively high. The costs of buying a home have reached historic highs.

As of the time I’m writing this (Monday, May 13, 2024), current interest rates in Connecticut are 7.07% for a 30-year fixed mortgage and 6.47% for a 15-year fixed mortgage. Current interest rates in Massachusetts are 7.00% for a 30-year fixed mortgage and 6.60% for a 15-year fixed mortgage. Compare this to the Massachusetts rate in 2016 – 3.54%. The rates have almost doubled in less than a decade, and there’s no sign of it slowing down.

Interest rates on student loan payments can reach 6-8% on graduate degrees. On a loan worth $45 – $100k, that amount is humungous! Most kids are just paying off the interest. In the 70’s a semester of college was $500. Today, try $20,000.

How Can I Give My Kids Money NOW In My Estate Plan?

You have several options.

One, is to just give them cash.

A second option is to put money in a trust that can help assist with their living expenses or mortgage payments.

There is also a third way to give your children an advance of sorts on their inheritance, if you’re worried about them getting an unfair amount relative to their siblings – through an appropriately-named term called “advancement.”

In the context of estate distribution, advancement refers to the partial or full satisfaction of an heir’s inheritance by an inter vivos gift made by the decedent to the recipient, which may require written acknowledgment that the gift is an advance on inheritance. Advancement is typically applied to intestate decedents; the related concept for testate decedents is ademption by satisfaction.

Let’s back up and parse through all of that legal mumbo-jumbo. We’ll start with that pesky Latin: “inter vivos.” This just means “during one’s lifetime.” So where a will might grant somebody some money or property after one dies, an inter vivos gift is given while the person giving the gift is still alive.

And what of that “intestate” and “testate” language. This is just a fancy way of saying with or without a will. If one dies intestate, that means they have passed away without a will. Testate thus means that you have passed away with a will.

So let’s say you’ve set a will; you will die testate. In your will, you’ve given your son your car. Here is where that “ademption by satisfaction” term comes into play. If you’ve already drafted a will and are giving your car to your son, that does not mean you cannot give your son the car now.

A lawyer such as myself could easily make it so your son gets the car now, when he needs it, and then you won’t owe him another car upon your death. It will be considered “adeemed,” which here means that it is (like the language says) satisfied. The box is checked. Think of it like an inverse IOU. It’s like an “I owed you, but now I don’t, since I already gave it to you.”

The moral of the story here: why wait? It’s hard out there for a young family just starting out, and your children can use all of the help they can get now. I’d be more than happy to guide you through the process of figuring out the best way to help your family both in the present and in the future.

Making moves now, instead of waiting until you pass away, will do more than just profoundly help your children – although it will certainly do that. Making moves now, though, will also allow you to live out your golden years knowing – and getting to see and experience – that your children are not only going to be OK, but are going to thrive.