estate tax

[goetteljp]

My aunt died last month (Jan 06) and left my sister an annunity worth appox 100,000. I am not sure if she was on the annunity as the beneficiary or co-owner. Would like to know the tax libility if she were to cash in the annunity. Sher is going to split the money with my brother and other sisters but is saying that the bank told her the tax was atleast 40%. It doesn't sound right?

[anteater]

Estate/inheitance tax depends upon the size of aunt's estate and what state she lived in.

Income tax depends upon the type of annuity, qualified or non-qualified, whether there is any cost basis in the annuity and how much if there is, how and when the annuity is liquidated, and sister's tax bracket and state.

You don't have enough info in your post to even guess, but the bank might be correct.

[goetteljp]

Her estate is only worth around 150K.

[anteater]

Originally Posted by goetteljp

Her estate is only worth around 150K.

That likely eliminates federal estate tax. But there still could be state estate/inheritance tax. For example, if aunt lived in PA, niece/nephew beneficiaries would get whacked for 15% inheritance tax.

And then, there is still income tax when the annuity is liquidated.

Best advice that you can give your sister is gather all the info she can on the annuity contract and spend a hundred bucks or so to consult with a tax pro.