When is a gift treated as an advancement of inheritance?

If you give a gift to your natural heir – to your child or grandchild, etc. – the tax authorities usually consider such a gift as an advancement given to an heir before the parent’s death. 

This way, advancements are gifts, which makes it necessary for the recipient to pay gift tax. If a gift has been defined as an advancement, it will be accounted for when the distribution of the estate is carried out and this also means that it affects the assessment of inheritance tax.

However, gifts are usually not considered advancements in the following circumstances:

• All natural heirs receive gifts of the same value.
• There is only one natural heir, and he or she receives a gift.
• The donor has set a specific condition, which may have been recorded in writing in the deed of gift, that the gift is not to be deemed as an advancement.

However, if the gift had not been designated as an advancement, the gift will be accounted for in the assessment of inheritance taxes if the gift was received maximally 3 years prior to the donor’s date of death.

Read more about how advancements are included in inheritance taxes.

Please note: If you sell property to a natural heir for a low price, as a gift-like sale, it may later be treated as a gift, and valuated again during the distribution of the estate that you leave behind. However, if the selling price is the same as the property’s fair market value, the sale cannot be deemed as an advancement.