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My husband, 67, wants to leave his $2 million estate and home to his disabled daughter and his sister’s kids. Can he do that? I could outlive them

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Dear Moneyist,

My husband is 67 years old with an estate worth $2 million. His first wife died. He has a severely handicapped daughter and we signed a prenup when we married three years ago.

He has a sister who is a year older than I am. I am 64 years old with two adult children from a previous marriage that ended in divorce. His sister has a son and daughter, and she has two granddaughters.

My husband wants to leave our house, which he owns and bought before we married, for as long as I live. He does not want my children to inherit it when I die. He wants it to go to his sister’s family.

The Moneyist: I took care of everything after my father died. My aunt, who claims she’s entitled to $27,000 in his bank account, says I only care about his money

Can he prevent my children from inheriting property he wills to me? The bulk of his estate is going to his daughter’s trust and sister anyway. It’s possible I may outlive his sister and daughter.

I know I’m the newbie here, but it just seems a little harsh that I can only have the house to live in and not sell it, if I need the money for future medical expenses.

He’s very controlling of his money. What do you think?

The New Wife With a Prenup

Dear New Wife,

Maintaining control of his money and/or managing his money is distinctly different from being controlling about money. It’s his money and it’s up to your husband to do with it as he sees fit. That includes taking care of his daughter financially, in the event that he predeceases her. Giving you a “life estate” or “right of residence” in his last will and testament is more than generous. You don’t have to worry about never having a place to live.

It’s time to right-size your expectations. You’ve been married to this man for three years. He is retired, I presume, and has lived a long and healthy life. As you said, you were not a couple when he earned most of this money and in a community-property state you are not entitled to any money that was earned before you married, even if you divorced. In a separate property state, I can’t see a judge awarding you his home and 50% of his assets.

You can look into a health savings account (HSA) to help save money for retirement, especially health-care expenses in your retirement. You are eligible if you have a high-deductible insurance plan, but it also allows you to shelter up to $3,550 (for an individual) or $7,100 (for a family) in pretax money, which is withheld by your employer (or set aside by you, especially if you buy your own health insurance) and placed in an HSA each year. An estate planner can help you explore other options.

The Moneyist:My mother gave me a substantial financial gift. I gave it back. My soon-to-be ex-husband says half belongs to him

In the meantime, by allowing you to live in his house for the remainder of your days does not mean you own the property. That is a win for someone you’ve only been married to for three years, especially given that you are both in your 60s. If you sold the house, where might that leave his severely disabled daughter if she were to need full-time care or future medical assistance? I see no reason why your children should be part of his estate planning.

His daughter is his No. 1 priority, and that is exactly how it should be. One of the biggest post-retirement expenses has been removed from your life, although you may have to pay for maintenance for upkeep and taxes on the property, depending on your husband’s will. That’s a small price to pay for his generosity. You have at least five more years of work ahead of you. You will have to make them count. I certainly hope you enjoy them.

The Moneyist: ‘I’m lucky to get by on $75,000 a year’: The $600 stimulus program doesn’t sound reasonable to me. Why am I left out?

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com

Want to read more?Follow Quentin Fottrell on Twitterand read more of his columns here

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These money and investing tips can help you stay upright against the market’s headwinds

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can give you greater knowledge about the financial markets’ current condition as you monitor your portfolio and plan ahead. Plus, check out several short videos about whether to include bitcoin and other cryptocurrency in your portfolio and how to go about it if you do.

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Opinion: I took advantage of the 2020 RMD rule but now my 1099-R looks wrong — what should I do?

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Q: I took advantage of the 2020 RMD rule and returned what I had taken from my IRA thinking there would be no taxes. I just got a 1099-R showing the full RMD. That can’t be right. How do I correct it?

—Pauline

A.: Pauline,

If the 1099-R is incorrect, you will need to contact the firm that issued the statement to get it corrected. However, the 1099-R is probably correct.

Read: Are there new RMD rules this year?

Under the law, the firm issuing the 1099-R has no responsibility for reporting how much of a distribution is taxable. That responsibility rests on your shoulders as a taxpayer. The issuing firm need only report what was paid out of the IRA on 1099-R.

Not sure where to retire? Let us help you find the right spot

That does not mean you will pay any tax. Any funds returned to the IRA by Aug. 31, 2020 is considered a rollover and is not taxable. Normally, Required Minimum Distributions (RMD) are not eligible for rollover, but IRS guidance after enactment of the CARES Act that waived RMD for 2020 changed that. The guidance stated the normal 60-day time limit for rollovers would not apply and instead instituted a fixed deadline of Aug. 31, 2020 to return such distributions and avoid taxation.

Read: It’s not too late to save on your 2020 tax bill — here’s how

I get similar questions about 1099-Rs every year. The reporting of the gross distribution looks like an error but in most cases, it is correct and the person receiving it simply hasn’t learned how it is accounted for yet.

Here’s how the accounting typically works.

As with any gross amount reported on Form 1099-R, you declare the amount that is not taxable when you file your 2020 tax return. What I hear most tax preparers would do in your situation is put the gross distribution amount from 1099-R on line 4a as per the normal procedure. Then, they would place a zero in 4b of your Form 1040, and put a note on the return near those lines that it was “returned to the IRA under the CARES Act,” “CARES Act rollover,” “CARES Act,” or simply “Rollover.”

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If you did not return all of distribution by the deadline, the portion that was not returned would be taxable. You would put that number on line 4b.

Read: 5 things to do if you inherit a Roth IRA

As I mentioned a moment ago, the discrepancy between the gross distribution reported and what should actually be taxable comes up in other situations. Three of the most common are other rollovers, Qualified Charitable Distributions (QCD), and distributions from accounts that had received after-tax contributions.

In all those cases, the reporting process looks like what I described above. You put the gross distribution on line 4a and the taxable portion on Line 4b. Then note why the numbers are different with “rollover,” “QCD,” or “See Form 8606” on the 1040. Form 8606 is the form used to determine the taxable amount of an IRA distribution when nondeductible contributions have been made to any of one’s IRA accounts.

If you have a question for Dan, please email him with ‘MarketWatch Q&A’ on the subject line.

Dan Moisand’s comments are for informational purposes only and are not a substitute for personalized advice. Consult your adviser about what is best for you. Some questions are edited for brevity.



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Video: Why Mike Novogratz sees bitcoin reaching $500,000 by 2024

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Galaxy Digital’s Mike Novogratz explains the outlook for crypto as Coinbase goes public.





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