Inherrited Annuities
My mom passed away leaving my sister and I two annuities that we are both 50/50 beneficiaries on. She had already started taking deductions and she was 72 when she passed. What are our options with the least amount of taxes being paid all at once?
Permalink Submitted by Al Fry on Tue, 2008-08-26 17:28
Sorry about your loss. If she was merely taking withdrawals (not annuitization) the annuity company can divide the annuity into two separate ones and allow each of you to: (1) take a lump sum; (2) defer for 5 years; (3) annuitize; or (3) stretch payments over your life expectancy (canculated exactly like an IRA stretch). If she had annuitized, options will be limited.
Permalink Submitted by ANTHONY PETRELLO on Sun, 2011-08-14 15:02
MY SISTER HAS 7 ANNUTIES WITH MYSELF AND MY DAUGHTERS AS EITHER CO OWNERS OR BENIFICIARIES…..WHAT SHOULD I KNOW ABOUT THIS THAT WOULD NOT COST US LOTS OF TAXES WHEN THE TIME COMES…
Permalink Submitted by Al Fry on Sun, 2011-08-14 15:57
That is a tough one. With most annuities there are not “Co-Owners”, especially not with more than two people. There is a basic Owner (uses his/her SSN) along with a secondary owner. You really should (with your sister) visit with a planner knowledgeable about annuities, one that knows more than to poo-poo them. If the planner does not sell annuities, he/she may not know much about them. Some annuities are owner-driven, some are annuitant-driven. Proper structure can save a lot of taxes.
Permalink Submitted by Bruce Steiner on Sun, 2011-08-14 16:18
There is often a tradeoff between cashing them in (which bunches the income) and stretching them out (which avoids bunching the income, defers the income tax, but all the income becomes ordinary, and there is often a high annual cost to maintaining the annuity). You might make some educated guesses as to investment returns and tax rates and run a spreadsheet to see if one way is significantly better.