Separate Funds

Today TaxMama hears from Ruth in Oregon who tells us, “I’m a divorced mother.  I think about remarriage, but I don’t think I’ll ever trust anyone 100% again.  Here’s my question.  I think I’d be brave enough to try it again, IF I could put a nest egg (say $30,000) somewhere just in case things didn’t work out. Then I wouldn’t feel as vulnerable as I was the first time around.  The trouble is…I would want to keep it secret, but it would show up at tax time even if I put it in a secret account and had statements mailed to a PO Box.  Can an account like that be paid separately from regular taxes? ”


Hi Ruth,

Sigh, I understand so well how you feel.

Let’s think. You could put all the money into an annuity in your name, with you as the beneficiary.

It’s there. You don’t need to touch it. You don’t pay any taxes on the growth. So nothing shows up
on your tax return.

You said you’re a mother, so…you might want to talk to someone about opening a code section 529 Plan for each of your children. This is a college savings plan. You name your children as the beneficiaries, but they don’t own it. You can take the money back any time – but there may be penalties on the earnings (not the principal) if the money isn’t used for college.

You can change the beneficiary at any time to someone else in the same generation or one generation over – or even yourself. http://taxmama.wpengine.com/Articles/529.html
Talk to an expert in this area – At least, the money is safe and the income isn’t reported.

Of course, you can put the money into Oregon tax-free municipal bonds. Then the interest won’t be taxable. So you won’t be reporting it on your tax returns.

You can always create a trust that keeps the funds out of his hands.

Or, you could always just file separate tax returns and each of you could keep your finances private.

Do sit down with a clever tax pro before you decide to get married. And really, it’s OK to divulge the existence of your money – as long as you’re not the kind of person to cave in under pressure – and don’t marry a man who would be abusive enough to push. Just make sure you have a pre (and post) nuptial agreement – and don’t ever put his name on the signature card.

Personally, I find that I’d rather not marry if I don’t have 100% trust.

Meanwhile, remember, you’ll find answers about lots of information about planning and other tax issues, free. Where? Where else? At TaxMama.com

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