Inheriting an Annuity

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chrisjul
Posts: 294
Joined: Sun Jan 06, 2008 2:15 pm

Inheriting an Annuity

Post by chrisjul »

What are the issues associated with inheriting an annuity?

I am in the process of inheriting one and do not know much about the tax issues or the strategies associated with dealing with it..Cash it in or take the payments. I am not sure how to analyze the issues.

Tks in advance!
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in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: Inheriting an Annuity

Post by in_reality »

I'll guess there is a window to withdraw funds, often 5 years after the policy holder's passing. This is company and policy specific i believe though. EDIT missed this: there may be an option Within 60 days, to annuitize over your own lifetime

Income is taxed at ordinary rates, so it may be best to distribute the income over time.

Gains are taken out first. You don't get a stepped up basis so the policy holder's basis is your basis as well.

If several people are inheriting, there may be restrictions on redemption that require coordination. For example, you may have a choice of redeeming immediately or taking the same redemptions as the others. So if you wanted to take 20 %, you could if everyone does. This is pretty company specific though and its best to contact the company for details.

Sorry for your loss of a loved one.
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