Why unmarried couples need a financial plan

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Q. Grandma and Grandpa were never married but live in the house together for a long time. Grandpa died and left the house to Grandma. Is there anything Grandma can do to avoid paying taxes on the house?
— Grandchild

A. We’re sorry to hear about your grandfather’s death.

We’re also sorry to say she’ll be stuck with the tax bill.

“The inheritance tax will apply and there is no way to avoid it,” said Steven Holt, an attorney and chair of the taxation, trusts and estates department at Mandelbaum Salsburg in Roseland. “As far as I have been able to determine, there really is no solution.”

When a couple isn’t married, there is no legal standing, especially because there’s no action that can be taken after one partner’s death.

Holt said a gifting scenario – during a lifetime – is not necessarily the answer because you can’t predict who will die first.

“One taxpayer tried a transfer with a reserved life estate and that also did not work,” Holt said. “The state took the position that the entire property was transferred at the death of the life tenant at his death and was subject to the inheritance tax on its date of death value.”

We’re sorry we don’t have better news.

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