Ask an Expert - Gift to Girl Friend at My Death

[Mike6174]

Asking for a friend and looking for advice - Joe has a net worth of approximately $4.0 million - mostly funds in brokerage account or IRA held in a trust.  He is 85 years old and has a live in girl friend who is 77. Joe is paying all of the current living expenses and when he dies, he want to provide something like $30,000 per year income for the girl friend until she dies. Joe has two adult children and a will that names them as beneficiaries. 

What is the best way to set this up to optimize taxes and keeping it simple?   Options seem to be setting aside a certain amount of money and use the income from that to fund the $30k per year. Is that taxable or is there a way to avoid taxes? Joe is well below the $11.7 million gift tax level and could easily give girlfriend a lump  sum gift now (in lieu of the annual payments) that would be tax free. Does setting up a separate trust make sense. 

Lots of parameters. All suggests welcome. Thanks.

[Bsch4477]

Your friend should seek the advice of an estate planning attorney. 

[xmasbaby0]

Your questions are way beyond the scope of this user forum for income tax and questions about tax software.  Your friend needs to seek paid help from an estate or financial planner.  It sounds like he can well afford that kind of advice so he should seek expert advice---not advice from strangers on an internet forum.

[Carl]

Overall, this sounds like a test question. But generally speaking and with some exceptions, an inheritance is not taxable or reported on any tax return. Some exceptions can include things like IRA's and the such.

[M-MTax]

Joe has two adult children and a will that names them as beneficiaries. 

Step 1: Get a lawyer specializing in estate planning and probate.

Step 2: Ask the adult kids if they're OK with this "gifting" to the girlfriend. 

[RobertB4444]

Nothing about this situation seems taxable.  But you definitely need a lawyer for the rest of this.