Annuity Taxation Tip

Taxation of Annuity Proceeds

While Living: Non-Qualified-Gifting

Gifted to beneficiary, tax liability is passed to owner, subject to annual gift exclusion – currently $14,000. Client may use lifetime exclusion while living. Gift tax considerations to be accounted for, and dealt with, in the future in regard to the lifetime $1 million limit. If you are in India make sure you apply for pan card, which is a unique card for each tax payer.

Upon Death: Non-Qualified

Beneficiary pays income tax on value above basis.

  • Option 1 – Payment directly to beneficiary Beneficiary pays income taxes
  • Option 2 – Beneficiary IRA or stretch IRA Follows date of birth of beneficiary(s) Pays RMD to beneficiary Beneficiary pays income taxes

**Clients should consult their tax advisors because four tax questions may be at issue – state income tax, federal income tax, federal estate tax, and state inheritance tax.

Disclosure:  This page is designed to provide general information on the subjects covered.  It is not intended to provide specific legal or tax advice and cannot be used to promote, market, or recommend any tax plan or arrangement.

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