Definition of Advancement
Advancement is the act whereby a parent makes a payment during their lifetime to a child, representing a portion of what the child might otherwise expect to receive as an inheritance upon the parent’s demise. This financial practice is not merely a generous parental whim but a strategic move in estate planning, ensuring assets are distributed according to parental wishes while potentially reducing future inheritance disputes.
Context and Implications
Advancement is akin to giving your offspring a sneak preview of their inheritance under the guise of financial support. It serves multiple purposes:
- Estate Planning Tool: By distributing assets early, parents can manage the size of their estate for tax benefits.
- Test of Responsibility: Think of it as the fiscal equivalent of letting your teenager drive the family car around the block; it’s a test of financial responsibility.
- Reduction of Future Conflicts: It’s a preemptive strike in the age-old battle of “He got more than I did!” among siblings.
Related Terms
- Inheritance: The assets received from someone’s estate after their death.
- Estate Tax: A tax on the right to transfer property at your death.
- Will: A legal document that outlines the wishes of the deceased regarding asset distribution and care of minor children.
- Trust Funds: Legal entities for holding and managing assets, often used to avoid probate and manage tax liabilities.
- Gift Tax: A tax on the transfer of any assets from one individual to another without receiving something of equal value in return.
Further Reading
To deepen your understanding of advancements and other financial strategies in family estate planning, consider perusing the following books:
- The Tools & Techniques of Estate Planning by Stephan R. Leimberg
- Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (and Others) by Jeffrey L. Condon
Advancement: not just an inheritance appetizer, but a full-course meal in effective estate management.
