Annuity Inheritance

The earnings on an inherited annuity are taxable.

Annuity inheritance. When you arrive at this point in your inheritance planning youll have spent a lot of time and energy on managing your estate and you may also be experiencing many of the mentally and emotionally draining symptoms of grief. Like any other type of income inherited annuities are taxable. What are inherited annuities What is an inherited annuity.

You can choose the 5-Year Rule that requires the person who has inherited the annuity to receive the full distribution of the total dollar amount within 5 years of the owners death. Doing so allows you to keep the same options as the original owner including the annuitys tax-deferred status. You will also be able to receive remaining funds as a stream of payments instead of a lump sum.

You can not inherit an annuity unless the annuity type allows you to include a death benefit which is written in the contract. If you purchase a single life or life only annuity for example the annuity would only pay benefits to you during your lifetime. First things first lets briefly define an inherited annuity.

For non-IRA inherited annuities you can receive payments either a single life based on your life expectancy guarantee or a payout option that provides income for a specific period of time. For example assume that you inherit an annuity from your spouse and you choose to stick with the original payment structure or the as-is option. Tax Rules for Inheriting an Annuity.

If an annuity contract has a death-benefit provision the owner can designate a beneficiary to inherit the remaining annuity payments after death. For instance a heavy spender who suddenly receives a large inheritance can use an annuity to reduce the risk of overspending and depleting their assets. Inherited annuities come with a number of tax implications especially if the inherited beneficiary is a non-spouse.

Can you cash out an inherited annuity. Generally speaking an inherited annuity isnt a special type of annuity thats been hidden away from like a present that your parents didnt want to find. How Inherited Annuities Are Taxed.