It is very common: one sibling needs a little help in life, financially, and mom and dad are in a position to help. However, they want to be sure that they treat all of their children equally. This is a very common situation. I will leave out the part about life doesn’t have to be equal, and assume that equality is the goal.

Mom and dad need to make sure to carefully document the “advance” or loan and to keep track of it. They need to decide, does it bear interest or otherwise account for the time value of money? Usually that part is just cast off, but by definition it is then “not equal” if that was the goal.

Let us assume three children, A, B and C. A gets $10,000 during life that is to be treated as a advance, and after mom and dad pass and necessary bills are paid, there is $110,000 in the estate to distribute. The correct way to then calculate is to add the $10,000 advance (with any accrued interest if that was accounted for) to the amount before dividing by three. So, $120,000/3=$40,000 each, but A only gets $30,000 since A already received $10,000 in advance.

Below is some law that explains that using the term “hotch pot” or “hotchpot” which means you add back the advance before doing your math to avoid a miscalculation. The interesting thing is if you instead just divide the $110,000 by three and deduct the $10,000, sister and brother B and C actually get more, but then it wasn’t “fair and equal” as mom and dad wanted (again not accounting for the time value).

The Michigan Probate Bench Book is instructive, in part:
Effect of lifetime gifts and loans. Property that a decedent gave during life to an heir is treated as an advancement against the heir’s intestate share only if the decedent declared in a contemporaneous writing or the heir acknowledged in writing that the gift is an advancement, or the writing or acknowledgment otherwise indicates that the gift is to be taken into account in computing the heir’s intestate share. (repeated four times I think)

That is based on statute in cases where the person(s) died intestate–fancy word for without a will:
700.2109 Advancements.

Sec. 2109.

(1) If an individual dies intestate as to all or a portion of his or her estate, property the decedent gave during the decedent's lifetime to an individual who, at the decedent's death, is an heir is treated as an advancement against the heir's intestate share only under either of the following circumstances:

(a) The decedent declared in a contemporaneous writing or the heir acknowledged in writing that the gift is an advancement.

(b) The decedent's contemporaneous writing or the heir's written acknowledgment otherwise indicates that the gift is to be taken into account in computing the division and distribution of the decedent's intestate estate.

(2) For purposes of subsection (1), property advanced is valued as of the time the heir came into possession or enjoyment of the property or as of the time of the decedent's death, whichever first occurs.

(3) If the recipient of property advanced fails to survive the decedent, the property is not taken into account in computing the division and distribution of the decedent's intestate estate, unless the decedent's contemporaneous writing provides otherwise.

There is a similar concept otherwise when a person dies testate–meaning with a will:
700.2608 Ademption by satisfaction.

Sec. 2608.

(1) Property a testator gave in his or her lifetime to a person is treated as a satisfaction of a devise in whole or in part only if any of the following are true:

(a) The will provides for a deduction of the gift.

(b) The testator declared in a contemporaneous writing that the gift is in satisfaction of the devise or that its value is to be deducted from the value of the devise.

(c) The devisee acknowledges in writing that the gift is in satisfaction of the devise or that its value is to be deducted from the value of the devise.

(2) For purposes of partial satisfaction, property given during the testator's lifetime is valued as of the time the devisee came into possession or enjoyment of the property or at the testator's death, whichever occurs first.

(3) If the devisee fails to survive the testator, the gift is treated as a full or partial satisfaction of the devise, as appropriate, in applying sections 2603 and 2604, unless the testator's contemporaneous writing provides otherwise.

Case law has referred to the addition on the front end as a “hotchpot” long before the Estates and Protected Individuals Code (or EPIC as it is commonly known) was a gleam in the drafters’ eyes:

“Hotchpot is the bringing into the estate of an intestate an estimate of the value of advancements made by the intestate to his or her children, in order that the whole may be divided in accordance with the statute of descents.” 18 C.J. § 240-B, p. 927.

If appellant’s proposed method were adopted it would result in assuming that the total of the advancements made by Mrs. Howlett to her respective children constituted a part of her estate. Thereby the amount of the estate would be increased from approximately $43,000 to something in excess of $80,000. Thereupon an equal distribution of the total estate would be made among the three children but from the share of each there would be deducted the advancements previously made by the testatrix to such child. As pointed out in appellant’s brief, this would result in distribution being made on the following basis: 42.11 per cent. to Pearl M. Larges, 33.70 per cent. to Fred H. Howlett, and 24.19 per cent. to LaVern Anderson.

Appellee objects to this method and urges that collation or hotchpot is resorted to only in cases of intestate estates; that the method is not in accord with the provisions of Mrs. Howlett’s will; that it would result in unequal distribution in that LaVern Anderson already has the present enjoyment of that portion of the estate advanced to her during her mother’s lifetime, while the other two children would receive a corresponding portion of the mother’s estate only through payments which will be deferred for a substantial period of time.”

In re Howlett’s Estate, 275 Mich 596, 600; 267 NW 743 (1936).

In that case, they argued over whether more particular provisions in the will overrode the intestate hotchpot rule. The testator provided for time value (which EPIC’s valuation rule seems to address in testate situations, absent clear direction as to time value).

And consider this instructive 1942 pre-EPIC case:
“The will indicates that Michael intended that his accumulations of a lifetime should be passed on equally to his six children and the children of his deceased daughter without favoritism. To that end he directed that any indebtedness due him at his death from any of them should be deducted from his or her share of the estate. All of his children were indebted to him in varying amounts and the will merely applies the usual rule as to advancements, which are added to the total valuation of the estate, the residue divided according to the will, and the indebtedness of each child deducted from his or her share. That Michael intended such indebtedness to be considered in the nature of advancements is further shown by a diary which he carefully kept for many years, in which he wrote shortly before deeding the house and lot to defendants and receiving exhibit 7 in return, as follows:

“Walter will get his home back, but with only one lot, and will have to sign off from all participation after me.”

Such an intent is also shown by his methodical keeping of books and ledgers of account in which were entered all his financial transactions, showing the moneys advanced by him to each of his children, including Walter’s indebtedness.

The conveyance of the house and lot to defendants was an ademption pro tanto of Walter’s share in the residue of Michael’s estate under the will to the extent of the indebtedness. This clearly appears to be the intention of the testator, and ademption is a matter of intent. Carmichael v. Lathrop,108 Mich. 473 (32 L.R.A. 232); In re Vincent’s Estate,241 Mich. 329.

It has been argued that the law of advancements, being statutory, applied only to intestate estates. The statute (3 Comp. Laws 1929, §§ 13445-13450 [Stat. Ann. §§ 26.986-26.991], reenacted in Act. No. 288, chap. 2, §§ 87-92, inclusive, Pub. Acts 1939 [Comp. Laws Supp. 1940, §§ 16289-2 (87)-16289-2 (92); Stat. Ann. 1941 Cum. Supp. §§ 27.3178 (157)-27.3178 (162), inclusive]) does not preclude a testator from expressly directing by will that any advancements during lifetime, or any indebtedness owing to him by any beneficiary at his death, shall be deducted from the share of such beneficiary in his estate. Advancements of this nature, and ademption of a share in the residue by reason of indebtedness, have heretofore been before this court in connection with testate estates and the construction of wills. In Re Bresler’s Estate,155 Mich. 567, this court had under consideration a will which gave a certain specific legacy to a daughter as her share of the estate, “of which sum shall be deducted the amount she may be owing on my books.” The amount of the indebtedness, as in the case at bar, was thus left open to proof. The books of account were in the handwriting of the testator and were held to be properly received in evidence. This court held that the intention of the testator must prevail, that the book items were established as proper charges against the legacy, and in so holding said (p. 575).”

Domzalski v Domzalski, 303 Mich 103, 110-11; 5 NW2d 672 (1942)

Of course, under EPIC a testator’s intent is paramount:

700.1201 Purposes; rules of construction.
Sec. 1201.

This act shall be liberally construed and applied to promote its underlying purposes and policies, which include all of the following:

(a) To simplify and clarify the law concerning the affairs of decedents, missing individuals, protected individuals, minors, and legally incapacitated individuals.

(b) To discover and make effective a decedent's intent in distribution of the decedent's property.

(c) To promote a speedy and efficient system for liquidating a decedent's estate and making distribution to the decedent's successors.

(d) To make the law uniform among the various jurisdictions, both within and outside of this state.

By my math, doing distributions as “deductive” as to the current balance, rather than additive actually favors the later receiving heirs. Under the additive method, two would receive $40,000, but under deductive, they would receive $41,666.67. The pre-receiving heir is penalized (not accounting for time value, of course, which varies widely on circumstance) as s/he receives combined lifetime/probate receipts of only $36,666.67. Instead, A should get $30,000 and B and C should get $40,000 under the scenario here.