My life partner is my 18 years old. He wanted to give me $4.5 million in wealth instead of his two children. Do we tell them?
"I'm not happy with the tax burden and the emotional burden it will leave behind." (The subject of the photo is the model.) - Getty Images/Istockphoto
My 17-year life partner, I want to create a will. He has two adult children who are financially unstable. I don't have children. He has accumulated considerable wealth ($4.5 million), 401(k)S, investment, inheritance, etc. in the form of military and civilian retirement. I was financially independent because my career thrived before meeting him. We have strong savings and our own real estate. Because of our wise choice of life, I am not as "hungry" as his children.
He wanted to leave everything to me, not including his adult children, because he knew they would buy yachts and go hungry. A recently skydiving with rent. He knew some form of "payment plan" from me to them would be more feasible. I'm not happy with the tax burden and the emotional burden it will leave behind. There is no doubt that they will feel that this arrangement is unfair and that may end our relationship.
He wished I could keep all his assets because despite his years of alienation, I and I gave them heavy assets as adults. Since I don’t have children, it’s hard for me to weigh equally. I have a nieces and nephews and I will leave the keys to the Kingdom, but I also "skip" his children completely conflictedly. It involves grandchildren, so we also envision skipping the kids and going to grandchildren.
He is 18 years older than me. His idea is that inheritance only applies to surviving partners, not to children, regardless of the circumstances. Should we discuss this with our kids now when everyone has a good mindset? I think one of them (if not both) doesn't think they need to attribute a lot to them because one day they will inherit Dad's money. But, this shakes, no one will be happy. I'm a little conflicted and happy to suggest.
"stepmother"
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Inheritance exists only once it is passed. Before that, it was part of his property and yes, your marriage property. - MarketWatch Illustration
This is your life, marriage and choice.
The older I am, the less time I spend and unless I am asked to give an opinion, I know the irony of consulting columnists. Since you asked: Your partner’s money is his way to his will. You'll figure out the tax burden, and there are some ways you can minimize taxes in addition to the shortfall of one-time payout. Inheritance exists only once it is passed. Before that, it was part of his property and yes, your marriage property.
I do have an uninvited suggestion: given that he intends to leave you a considerable amount of wealth (or, according to your point of view, a large fortune), I suggest you tie the knot. Domestic partners won't benefit from a range of federal tax benefits, which will make your life more difficult and expensive, assuming your partner dies in front of you (because he's 18 years old, your senior year).
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If you are not married, you will leave a lot of money on the table. The benefits you will not qualify include: Social Security Survivor Benefits, which may include monthly payments based on your deceased spouse’s work history and even eligibility for Medicare; estate and/or gift tax; income tax benefits when inheriting a tax retirement account. (There are restrictions on inheriting the IRA of an unmarried partner. You can read more here.)
If you choose not to get married – an easier solution is also a clear signal for all those involved to whom you intend to combine the assets – your spouse can build a trust to provide health, education, maintenance and support (also known as the “HEMS Standard”). HEMS serves as the IRS's "safe harbor rule", which means the trust is exempt from federal estate taxes. It also prevents litigation.
Bypass trusts (also known as credit transfer trusts) help wealthy people avoid inheritance and probate. A certain amount of assets is placed in the trust that cannot be revoked after your partner dies and appoints heirs to earn income from the trust. Trusts are often very flexible and can be written to include allocations for payment for graduate education, weddings and other life milestones.
For assets that you don’t trust: Your partner can name you as the beneficiary and/or create a deed of death. Always avoid putting names on deeds so that the heirs can take advantage of the steel class, and these words apply capital gains to fair market value to fair market value when the owner dies rather than the original purchase price. As always, the consultant will help you build trust in more detail.
If you get married: Turbotax says that the estate is not considered ordinary income by the IRS, but subsequently taxable on income from inherited assets, including interest income and dividends (unless it is a Roth IRA that is after tax income, such as after-use after-tax income. An IRA that is inherited in your name.”
You can also include your husband's assets in your own 401(k) or IRA. If your (future) husband has started making the minimum required minimum allocation, you can choose to continue taking these rmds or rolling 401(k) into your name account and wait until your 73 year old, the age at which the RMD starts, the age at which the RMD starts. It added that aggregation of pre-tax assets or 401(k) accounts will obviously be taxed. (RMD age rises to 75 in 2033.)
Your partner/husband or any trust you have built throughout your life can also prepare your partner’s grandchildren, including 529 tax benefits for their education. You should also consider long-term care insurance. It is up to your partner to decide what he communicates with his two children, but doing so may imply that they are entitled to any of his assets.
This decision is between you and him. No one else.
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