Almost every estate dispute among children seems to have an emotional component relating to perceived disparity in treatment by one or both parents. For example, a will may leave property in equal shares to the Decedent’s children, but the children still argue because one feels that the other received more financial support during the Decedent’s life. Usually this results in one side making the argument that certain lifetime gifts should be counted against the child who received them and reduce their share of the estate.
If a lifetime gift counts against a share of the estate, it is commonly referred to as an advancement. The Colorado Probate Code is very specific regarding what is necessary for a gift to qualify as an advancement or ademption by satisfaction. Colo. Rev. Stat. § 15-11-109, which is entitled “advancements,” addresses the requirements when a Decedent dies intestate. Colo. Rev. Stat. § 15-11-609, which is entitled “Ademption by Satisfaction,” addresses the requirements when a Decedent dies with a will.
To be considered an advancement, (1) the will (if there is one) must specifically provide for deduction of the gift or (2) a contemporaneous writing by the Decedent or the heir (or devisee) must declare that the gift should be counted against a devise made in the will or the intestate share of the heir. Colo. Rev. Stat. §§ 15-11-109(1) & 15-11-609(1).
For purposes of valuation, the property is valued at the time the heir or devisee came into possession or enjoyment of the property or the Decedent’s death, whichever occurs first. Colo. Rev. Stat. §§ 15-11-109(2) & 15-11-609(2).
The two statutes address the effect of the heir or devisee predeceasing the Decedent. If the Decedent dies intestate, the property is not taken into account unless the Decedent’s contemporaneous writing provides otherwise. If the Decedent dies testate, the gift is considered a full or partial satisfaction of the devise, as appropriate, in applying 15-11-603 (antilapse statute) and 15-11-604 (failure of a testamentary provision), unless the testator’s contemporaneous writing provides otherwise. Colo. Rev. Stat. §§ 15-11-109(3) & 15-11-609(3).
Finally, for a Decedent who died intestate, Colo. Rev. Stat. § 15-11-109(4) provides that an heir does not have to refund the estate if he or she received more than his or her share, unless otherwise provided under the elective share statutes.
In order to minimize disputes, an estate planning attorney should ask their clients whether they wish to have any gifts counted as advancements and whether they have executed any other relevant writings. For example, ambiguity could arise if the Decedent had a contemporaneous writing that referred to a certain gift as an advancement, but then signed a will at a later date that does not mention the gift. Does the later will override the contemporaneous writing?
Finally, the calculation of the impact of an advancement is referred to as a “hotchpot.” Below is an example:
- an estate holds $280,000
- the estate is to be divided equally among three children
- one child received a $20,000 advancement
First, the $20,000 advancement has to be added back in: $20,000 + $280,000 = $300,000.
Second, the total is divided by the number of beneficiaries: $300,000/3 = $100,000 per beneficiary.
The $20,000 is then subtracted from the share for the beneficiary that received the advancement, so the final shares of the estate would be (1) $100,000, (2) $100,000 and (3) $80,000.