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beneficiary of annunity

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What is the name of your state (only U.S. law)? nj

If you become a beneficiary of an annunity, do you have to pay taxes on that sum?
 


HRZ

Senior Member
More correctly you need to pay income taxes when it is paid out to you....and there might be federal or state estate or inheritance taxes that somebody owes ..
 

ALawyer

Senior Member
Death and Taxes on an Annuity

More correctly you need to pay income taxes when it is paid out to you....and there might be federal or state estate or inheritance taxes that somebody owes ..
State and federal governments need taxes to operate. To the extent that an asset increases in value, at some point that increase in value is usually subject to income tax at the federal level and if your state has income tax, at the state level.

With an annuity the year by year increase in value is not taxed so long as the money remains in the annuity. When it come out of the annuity the insurance company reports the increase in value to the government and it becomes fair game for the taxing authorities. Speak to an accountant to determine if there is some way to ameliorate the tax bite by at least having the gain offset with something else -- such as a deferral of other income -- so as not to jump you into a much higher tax bracket.
 

adjusterjack

Senior Member
What is the name of your state (only U.S. law)? nj

If you become a beneficiary of an annuity, do you have to pay taxes on that sum?
If, by beneficiary, you mean that the annuitant died and you received a death benefit (basically life insurance) then, no, I don't think you pay taxes on it.

However, if the annuitant had arranged for any payments to continue to you for any amount of time after his/her death then, yes, all or part may be taxable.

You need to sit down with a tax pro and have him/her go over the exact details to determine tax treatment, if any.
 

LdiJ

Senior Member
If, by beneficiary, you mean that the annuitant died and you received a death benefit (basically life insurance) then, no, I don't think you pay taxes on it.

However, if the annuitant had arranged for any payments to continue to you for any amount of time after his/her death then, yes, all or part may be taxable.

You need to sit down with a tax pro and have him/her go over the exact details to determine tax treatment, if any.
The best answer is maybe.

The annuity could be a qualified retirement account in which case there would be taxes due (but no penalty) if the account is not rolled over into a qualified retirement account in the beneficiary's name.

The annuity could be an investment funded with post tax dollars and therefore if the account is cashed out there could be a taxable interest portion, but no tax on the principal.

The annuity could be a type of life insurance where there would be no taxes due.

There are probably some other combinations that I have not thought of. Therefore the answer can only be "maybe".
 

HRZ

Senior Member
IN my state the answer might also depend on if it was a qualified annuity or non qualified annuity ...but I'm not in NJ.
 

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