Gifts & loans to family beneficiaries- how should they be dealt with on death?

It is common for clients to financially help their family members during their lifetime, not necessarily on an equal basis. This assistance can be in the form of a loan, a gift to reduce debt, or buying an asset to establish a business. But the client should be asked how this should be dealt with on death, particularly where the gift is substantial and unequal to all family beneficiaries.

Part of dealing with this issue is to identify a client’s “bequest philosophy”. For example, does the client want their beneficiaries to receive equally, regardless of their resources, opportunities or circumstances or do they want to achieve an equal outcome, taking into account their resources or opportunities in life?

If either situation is identified, Inherit’s AI legal bot will delve deeper and help you ask your client if the gift or loan is to be adjusted in the distribution of the client’s estate, how this will occur and when.

Examples of adjusted and non-adjusted gifts are as follows:

Example 1 of an adjusted gift

- Harry has three children, Tom, James and Mary

- Harry decides to leave his son Tom a bequest of his Porsche motor vehicle valued at $100,000 and the remainder of his estate equally to Tom, James and Mary

- Because Harry is not leaving an equivalent gift to James and Mary, he elects for the value of the Porsche to be adjusted in the distribution of the remainder of his estate with the result that Tom receives less of the remaining estate, but each of Tom, James and Mary receive Harry’s estate equally

Example 2 of an adjusted gift

- Peter has two children, Margaret, who is a doctor and Trevor, who is unemployed;

- Peter wants to help Trevor establish a business and decides to gift (or loan) Trevor $250,000;

- Peter believes that his children should equally benefit from his estate despite their resources

- Peter specifies in his Will that the gift or loan that he made to Trevor during his life is to be adjusted in the distribution of his estate, passing to both Trevor and Margaret upon his death with the result that Trevor receives $250,000 less in his half share of the estate.

non adjusted gifts
In the examples above, Harry and Peter may believe that the gifts they want to provide to their specific children should not be adjusted in the distribution of the remainder of their estate. This may be because Harry and Peter want to provide additional assistance to a particular beneficiary due to their specific need or circumstances or because other beneficiaries have received other benefits during their lifetime.