For estate planning purposes, it is important to keep track of the loans and financial gifts that you give to your children while you’re still alive. Do they count as an advance on that child’s inheritance or not?

Maybe you have three children, for example. Two of them do very well financially and need nothing from you. The third struggles to make ends meet. When that child wants to buy a home, you give them $50,000 so that they can have a down payment and cover the other related costs. The child promises to pay you back, but you do not set up monthly payments or make any other solid plans.

If you pass away and leave equal amounts of money to all three children, will the other two feel slighted? Technically, they ended up with a smaller portion of your wealth. To avoid this, do you want to count the $50,000 as an advance? You can then give that child $50,000 less as part of your estate plan, evening things out and keeping the peace between the kids.

Experts warn that your will and/or trust should specify exactly what you want. If it does not mention the loan or the gift at all, it does not count as an advance, but you can put into the document that an unpaid loan should count against the inheritance. This way, the child can pay back as much as possible while you’re alive — perhaps even the whole loan — and then the estate plan simply makes up the difference.

As you can see, these situations often get complicated. Be sure you understand exactly what steps to take.