Consider another example.
This time, the person has $1 million and wants half to go to a domestic partner. The remaining 50 percent would be split equally between the domestic partner’s two children – children who were never adopted by the decedent.
Exactly what happens would depend on whether the estate or the beneficiaries pay the inheritance tax, said Steven Holt, an attorney and chair of the taxation, trusts and estates department at Mandelbaum Salsburg in Roseland.
There are several possibilities.
If the will says the tax would be paid by the beneficiary, the domestic partner would receive $500,000 and each child would receive $212,500 after the 15 percent inheritance tax was paid, Holt said.
The most typical scenario, Holt said, would be if the will provides that the tax is payable by the residuary estate based on percentages after the tax was paid.
“After applying the formula, the result is that the domestic partner receives $465,117, and each child receives $232,558,” he said. “The tax is $69,767, which is 15 percent of what the children have received.”