Paying Taxes on a Spouse's Inheritance Withdrawals

[Wyndru]

This week, one of my friends found out her husband of 5 years was not who she thought he was. She found out that he had lied to her about having a really good job, but instead was withdrawing from a $150,000 inheritance to pay bills, as well as feed his coke habit, and support his mistress, whom he was living with during "work" hours.

This was a shock to her since he covered it all up well, he always struck me as a normal dude. She is filing for a divorce with him after she confronted him and he admitted. The problem is that she is now discovering that he tapped into her funds quite a bit after the inheritance ran out. He took out cash advances, which she is now going to have to repay with over 20% interest. Thousands of dollars.

He never paid any taxes on his inheritance withdrawals, and she is worried that the IRS will go after her for this money, since they filed joint during this time. Can they collect from her, or would they only go after him for this money?

 

[JS80]

This week, one of my friends found out her husband of 5 years was not who she thought he was. She found out that he had lied to her about having a really good job, but instead was withdrawing from a $150,000 inheritance to pay bills, as well as feed his coke habit, and support his mistress, whom he was living with during "work" hours.

This was a shock to her since he covered it all up well, he always struck me as a normal dude. She is filing for a divorce with him after she confronted him and he admitted. The problem is that she is now discovering that he tapped into her funds quite a bit after the inheritance ran out. He took out cash advances, which she is now going to have to repay with over 20% interest. Thousands of dollars.

He never paid any taxes on his inheritance withdrawals, and she is worried that the IRS will go after her for this money, since they filed joint during this time. Can they collect from her, or would they only go after him for this money?

Wow holy shit. The beneficiary does not technically pay a tax on the inheritance. The estate pays the tax. That's why they call it the estate/death tax.

 

[Wyndru]

Wow holy shit. The beneficiary does not technically pay a tax on the inheritance. The estate pays the tax. That's why they call it the estate/death tax.

Ahh, yeah I see in NY that there is no inheritance tax, only estate tax.

Sorry, I'm completely lost when it comes to this stuff, does that mean he didn't need to pay taxes on the money he withdrew from the inheritance account? That would be such a relief for her.

 

[CPA]

As JS stated, she doesn't have anything to worry about, the recipient does not pay taxes on an inheritance. The Estate Tax, as well as the Gift Tax, are two of the most misunderstood taxes on the books. Neither are taxable to the recipient, both are taxable to a point to the giver or estate holder.

 

[Wyndru]

Nice. Thanks for the info.

 

[CPA]

Ahh, yeah I see in NY that there is no inheritance tax, only estate tax.

Sorry, I'm completely lost when it comes to this stuff, does that mean he didn't need to pay taxes on the money he withdrew from the inheritance account? That would be such a relief for her.

No, he doesn't. Like the Federal tax, the estate was responsible for filing and paying any tax due.

 

[JS80]

Ahh, yeah I see in NY that there is no inheritance tax, only estate tax.

Sorry, I'm completely lost when it comes to this stuff, does that mean he didn't need to pay taxes on the money he withdrew from the inheritance account? That would be such a relief for her.

It means the estate paid the tax when it transferred the inheritance to the scumbag. The "inheritance account" was most likely a trust account set up with tax planning done. I would tell her not to worry about it. Unless the guy had 9 other brothers with 6 figure inheritances, it's most likely the $150k inheritance was tax exempt anyway.

 

[Sluggo]

Even if her issues go deeper than this, the IRS offers some "innocent spouse" protection from tax liabilities that she might be eligible for.

http://www.irs.gov/pub/irs-pdf/p971.pdf

 

[Old Hippie]

Next episode of "Who The [Bleep] Did I Marry"?

 

[Hacp]

This week, one of my friends found out her husband of 5 years was not who she thought he was. She found out that he had lied to her about having a really good job, but instead was withdrawing from a $150,000 inheritance to pay bills, as well as feed his coke habit, and support his mistress, whom he was living with during "work" hours.

This was a shock to her since he covered it all up well, he always struck me as a normal dude. She is filing for a divorce with him after she confronted him and he admitted. The problem is that she is now discovering that he tapped into her funds quite a bit after the inheritance ran out. He took out cash advances, which she is now going to have to repay with over 20% interest. Thousands of dollars.

He never paid any taxes on his inheritance withdrawals, and she is worried that the IRS will go after her for this money, since they filed joint during this time. Can they collect from her, or would they only go after him for this money?

So once the money ran out, she left him? How come this never happens the other way around?

 

[allisolm]

If the inheritance money was placed in an interest bearing account, would he not owe taxes on any interest earned?

 

[dank69]

So once the money ran out, she left him? How come this never happens the other way around?

Read it again.

 

[highland145]

I assume he was an authorized signer, allowed to take the cash advances off of her accounts.

 

[alkemyst]

How does $150k support 5 years of hookers and blow? That's not even equivalent to a $30k/year job.

 

[Wyndru]

How does $150k support 5 years of hookers and blow? That's not even equivalent to a $30k/year job.

He wasn't doing this for the whole time. He did have a job and was doing well when they first met, but things went downhill recently. Apparently he got laid off a year or two ago, yet right around that time he told her he got a promotion.

I assume he was an authorized signer, allowed to take the cash advances off of her accounts.

yup, she isn't worried about that though, she makes decent money herself and can pay that if she needs to. She is just worried about any early withdrawal on the inheritance that she might get nailed for. She doesn't know what kind of account it was, she thinks it may have been some kind of IRA that he wasn't supposed to touch till he retired. I had never heard of an inheritance being set up as an IRA though. She is going to see if she can find out more from his family what is going on.

 

[chusteczka]

He did have a job and was doing well when they first met, but things went downhill recently. Apparently he got laid off a year or two ago, yet right around that time he told her he got a promotion.

He should not have deceived her.

Otherwise, this is typical. Guy is doing well. Guy meets girl. Guy's life goes downhill. Girl leaves guy.

 

[Wyndru]

He should not have deceived her.

Otherwise, this is typical. Guy is doing well. Guy meets girl. Guy's life goes downhill. Girl leaves guy.

I think she is more concerned with what would happen if she spent her life with a lying, cheating drug addict (as opposed to standing by her man), as crazy as it sounds she is worried about the quality of her life.

 

[highland145]

I think she is more concerned with what would happen if she spent her life with a lying, cheating drug addict (as opposed to standing by her man), as crazy as it sounds she is worried about the quality of her life.

What's happened to the women of America.

 

[Lifted]

If she's ready to leave him after only five years, regardless of the incident, then they were meant for each other. Marriage should be for life. And that is exactly why I will never get married. :whiste:

 

[alkemyst]

If she's ready to leave him after only five years, regardless of the incident, then they were meant for each other. Marriage should be for life. And that is exactly why I will never get married. :whiste:

because no one would want to spend their life with you?