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I’m dating a married man. He made me the beneficiary on a $100K life-insurance policy. Could his wife sue to claim this money?

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I live in Utah, and I have been seeing a married man for almost six years. No, I’m not ashamed. Although we both care greatly for each other, our relationship started as and remains a mutually beneficial one: money for me, companionship for him.

He has been my sole source of income for the last 5 years, paying every single expense I have, and he is happy to do so because he loves me, and I provide an escape from his miserable home life (his words). He’s been married a long time, and his only child is grown.

He is much, much older than I am, and he recently set up a life-insurance policy of $100,000 with me as the beneficiary. His wife knows nothing of me or the policy. We’ve taken steps to ensure I can get a copy of his death certificate without his family knowing.

He is mentally sound (always has been) and in great health. I need to know if his wife would have any claim to that policy should she discover it after his death. What is the likelihood a lawsuit would be in her favor if she sued? Does it matter who makes the payments on the policy?

The Other Woman

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

Dear Other Woman,

Shame is a terrible, destructive force in individuals and societies, and I would not wish it on anyone.

Married life is more complicated than many people care to admit. Some marriages have “don’t ask, don’t tell” arrangements. Others are marriages of convenience. And others keep one person completely in the dark about their spouse’s infidelities. And, yes, some wives are probably glad to have time and space for themselves, and would rather others listen to their husbands.

To your question, Utah is an equitable-division state, so a challenge would be risky and expensive. However, a spouse may have a right to claim in one of the nine community-property states, under the assumption that marital funds were used to pay the premiums.

According to Dupont & Blumenstiel, a law firm based in Dublin, Ohio, in a case like this “a strange result can occur when community funds are used to purchase a policy and the surviving spouse is not made the beneficiary of the full proceeds.”

“In this case, the IRS believes that although one-half of the proceeds are includable in the deceased spouse’s federal gross estate, in certain circumstances the surviving spouse may have made a gift of that spouse’s half of the proceeds to the named beneficiary,” it adds.

Still, it’s usually a complicated and prolonged process to even attempt to break a life-insurance policy, which is a legal contract between him and his insurance company. According to Heban, Murphree and Lewandowski, a law firm based in Toledo, Ohio, “This process is not easy to navigate.” His wife could also have to prove the policy went against his intentions.


Your partner is not being transparent in life, and only in death is he prepared to reveal the truth about your relationship.

“While it is possible to dispute beneficiaries on a life-insurance policy, doing so creates a tremendous amount of cost and takes a lot of time,” the law firm says. “It also forces the rest of the estate to stay open, preventing the probate courts from closing the estate and distributing its assets. While the estate is held in the courts, fees, taxes, and other penalties will continue to build.”

“To avoid this, some families will take the dispute to mediation or arbitration to work out a settlement. This takes less time and costs less money. In this process, the interested parties can figure out a way to split the benefit to avoid a costly and lengthy court battle. This type of settlement can protect the estate from unnecessary expenses,” it adds.

As to your other question, it depends on the terms of the particular policy, but the insurance company is mostly concerned that the premiums are paid in full, per the agreement. Ultimately, one can’t predict how people react in times of grief. Your partner is not being transparent in life, and only in death is he prepared to reveal the truth about your relationship. That price of that is $100,000.

It is also a price that will be borne by both you and his wife upon his death.

The Moneyist: ‘I feel un-American’: I was broke in my 20s, and live in fear of debt. My wife wants to upgrade our home and life. What do I do?

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

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My fiancée’s mother asked us to raise her 2 kids, as we live in a good school district and she has a gambling addiction — then she claimed their stimulus checks

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Dear Quentin,

Last year, in February, my fiancée’s stepfather passed away. After his passing, my fiancée’s mother asked both her and me to raise her younger sons, as we had recently purchased a new home, have degrees and will be able to provide a great area for their education, such as help with homework and the ability to communicate with their schools or doctors. My fiancée’s mother cannot read, write or speak English, and she has an addiction to gambling at casinos.

COVID-19 hit soon afterward. We both were let go from our jobs, and are making it by with unemployment and savings.

With that said, in March of this year, we filed taxes and my fiancée claimed both of her brothers since they had lived with us for almost nine months of last year. We received both of their stimulus payments a few days later. About three weeks later, we found out that my fiancée’s mother had also received the stimulus payments, even though she is adamant that she did not claim her children this year.

Upon seeing the money, I advised her to leave the money as the Internal Revenue Service may eventually ask for it back. Her new boyfriend then quickly told her to withdraw it anyway. They’ll deal with it later if the IRS asks for it, he said.

My question is: Will this situation hurt my fiancée and me in any way? I fear that the IRS may find out sooner or later about the error and seek the money from us, as her mother may have already gambled away that stimulus money, and make us pay for it even though we are using it as it was intended: for bills and necessities.

Fiancé

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

Dear Fiancé,

You are correct. The IRS will eventually ask for that money back, and it will likely do so by deducting the money from a future tax refund. You are also correct that your de facto mother-in-law should not spend the money. I take my hat off to you for raising these two children, and giving them a stable home and the head start in life that they deserve.

Many people in such a situation would write complaining about how they did X, Y and Z, and their in-laws were ungrateful. But you have taken the high road, knowing that these shenanigans are between you two and your fiancée’s mother, and do not involve your girlfriend’s two younger siblings. I am glad that you have not involved them in this somewhat messy situation.

You, of course, have done the right thing. The Moneyist column has dealt with dependents who claimed the stimulus, and parents who are not guardians of their children collecting it. The $1,400 economic stimulus payment, as you are aware, is not a loan. This third stimulus check is an advance tax credit on your 2021 taxes, and calculated based on your 2020 taxes.

If the IRS does not know who is telling the truth here, it will audit both parties. The truth will come to light eventually, and your fiancée’s mother and her boyfriend should be made aware that you are not in a position to help bail them out of this situation. They have knowingly walked into it, and there should be a clear boundary between helping her children and being a facilitator to this malfeasance.

The IRS has extensive guidance on what to do when someone fraudulently claims your dependent. “If you determine the other person was not eligible to claim your dependent, you’ll need to take steps to protect your right to claim the dependent and ensure an accurate filing,” it says. You have everything you need to know in order to take proactive steps here.

I leave that for you to decide.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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I’m on track to retire at 58. My fiancée is in debt and drives my old car, and I support her family. How do I ensure my son inherits my wealth after I die?

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Dear Quentin,

I have dated my fiancée for just over three years. Within those three years, I have been severed from a job and spent two years unemployed looking for a new job. I have a new job, making roughly 75% of what I previously made, but it is a more than livable salary. My fiancée makes a modest salary in comparison to my own.

Financially, I had spent a lot of years going without in order to pay for my son’s college education and to stockpile savings in order to retire early. According to my financial planner, I am well ahead of my goal to retire at 58 (I’m 51 currently) with an IRA of around $2 million, plus savings and other liquid assets.

Currently, my fiancée is trying to get herself out of debt. She drives my old car and shares no utility bills or mortgage payments, but she does buy groceries, as the household is made up of her, her children and me. By supporting her family, I have very little I can do for my own son.

It has always been tradition in my family to leave an inheritance. I had planned on leaving my only son a rather large inheritance so that he may better himself and his family. My fiancée has children, and my concern is that if I am married (I live in Texas), the savings I have would go to her and subsequently her children, bypassing my son.

Since I am 10 years older than my fiancée, I suspect she may outlive me. How do I protect my assets so that they can be split as part of my wishes?

Nervous Fiancé and Father

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.

Dear F & F,

Texas is a community-property state, so what you bring into the marriage, you also take out of the marriage. Assets accrued during the marriage, with the exception of inheritance, are deemed marital or community property.

You have several options, including setting up a living trust to allow you to transfer your wealth to your son during your lifetime, and thereby avoiding going through probate, which can be an unpredictable, cumbersome and public process.

You have two choices of trust: revocable or irrevocable. The first can be changed. You could retitle financial accounts in your son’s name. The latter cannot be changed, and also serves to save on estate taxes. It’s typically used to leave assets to children and grandchildren.

Other routes: a prenuptial agreement, a will (obviously) and naming your son as your beneficiary on your life-insurance policy. With the help of an estate planner, you can devise ways to ensure your son is taken care of after you’re gone, and your future wife is not left out.

In the meantime, ensure you keep separate property separate. If you deposit an inheritance in a joint bank account, for instance, it becomes marital property. If your fiancée contributes to the renovation of a home in your name, it again becomes community property.

Speak to your fiancée about your concerns and goals. It’s important to be transparent and ensure that you and she are on the same page, and share the same financial expectations. You may also want to wait until your wife pays her debts before marrying.

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Credit Suisse: $2.3B at risk in Greensill funds

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Credit Suisse Group AG flagged around $2.3 billion in problematic loans in its Greensill Capital funds, giving investors in the funds a more concrete sense of the size of their potential losses from the U.K. firm’s demise.

The Swiss bank is liquidating $10 billion in a group of funds it ran with Greensill. In a Tuesday update, Credit Suisse said so far it has gotten $5.4 billion back for investors.

The bank said three borrowers are “driving the valuation uncertainty” in the remainder of the four funds’ investments. The three borrowers are metals magnate Sanjeev Gupta’s GFG Alliance; West Virginia Gov. Jim Justice’s coal company, Bluestone Resources Inc.; and SoftBank Group Corp.-backed construction startup Katerra.

GFG companies owe the funds $1.2 billion, while Bluestone owes $690 million. Katerra owes $440 million.

The bank is working to recover the amounts it identified, but it isn’t yet clear how much it will eventually get back.

A spokesperson for Grant Thornton, the administrator in Greensill’s U.K. insolvency, declined to comment.

Spokespeople for Bluestone Resources and SoftBank didn’t immediately respond to requests for comment.

The problems at the Greensill funds began a month of crisis for Credit Suisse. It removed staff from the funds, named a new head of asset management and formed a crisis team to investigate what went wrong.

Then, later in March, its investment bank lost $4.7 billion from big, concentrated stock positions it financed for hedge fund Archegos Capital Management. Several top executives have left the bank and internal and external crisis teams are now studying the events around Greensill and Archegos, as well as Credit Suisse’s broader risk culture.

Greensill’s demise last month left GFG, Greensill’s biggest borrower, scrambling to survive. Greensill lent GFG billions of dollars to buy steel assets across the world. Greensill used its German bank and the Credit Suisse funds to finance the GFG loans.

In recent weeks, Credit Suisse has taken legal action to liquidate some GFG assets for repayment. On Tuesday, it said it was working with legal and restructuring experts on strategies to pursue each of the three flagged borrowers.

A GFG spokesman didn’t immediately respond to a request for comment. A GFG spokesman pointed to a previous statement that said the company was in discussions with Greensill’s bankruptcy administrator to negotiate a solution, and that it would defend any legal action on the grounds that it has a three-year committee facility with Greensill.

Greensill specialized in an area known as supply-chain finance, a form of cash advance that lets companies stretch out the time to pay bills. Greensill packaged those cash advances into bondlike securities. Credit Suisse’s funds were the main buyer of those securities, giving Greensill firepower to expand its business.

Credit Suisse’s fund liquidation process involves collecting money from the borrowers as the loans — many of them short-term — mature, and then returning the cash to investors. After a fresh installment, the total returned so far will be $4.8 billion, Credit Suisse said Tuesday.

Bluestone sued Greensill in New York federal court in March, alleging it perpetrated a fraud on Bluestone under the guise of giving it long-term financing.

At the time, Greensill declined to comment on the Bluestone lawsuit.

In December, Greensill forgave loans from Katerra in exchange for a stake in the company, The Wall Street Journal reported, citing Katerra’s chief executive. The Journal reported last month that SoftBank had put $400 million into Greensill at the end of last year to make Credit Suisse investors whole. That money hasn’t reached the bank, according to people familiar with the matter.

Katerra was one of several companies backed by SoftBank’s Vision Fund that Greensill lent to after receiving its own $1.5 billion investment from the Vision Fund in 2019. Credit Suisse has said previously that losses from Greensill’s collapse could be material for itself and fund investors.

–Duncan Mavin contributed to this article.

Write to Margot Patrick at margot.patrick@wsj.com and Julie Steinberg at julie.steinberg@wsj.com



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