nonqualified annuity
client (no spouse) puts in $100,000 and it grows to $150,000. client passes away and leaves money to his son, beneficiay listed on contract.
his son takes the money out in a check (lump sum) form. Since his fathers assets were under the 1.5m exclusion, does this mean that his $150,000 is not taxed or does he still have to pay taxes on the $50,000 gain?
Thank you,
doug
Permalink Submitted by Matt Harrington on Wed, 2007-12-05 23:10
Providing your estate planning team has advised you that the client is not subject to any estate tax (neither federal NOR state), only (!!) ordinary income is owed on the gain.
Too bad he took the lump sum check – the son could have “stretched” the annuity tax liability instead of owing ordinary income on the entire gain.