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The final drawing for Lotto South...

Topic closed. 16 replies. Last post 11 years ago by lchoro.

Page 2 of 2
konane's avatar - wallace
Atlanta, GA
United States
Member #1265
March 13, 2003
3351 Posts
Posted: February 27, 2006, 6:52 pm - IP Logged

Naming a beneficiary for your annuity bypasses the estate when you die. My father had two such annuities set up for my mom. The portion of the annuity payments that's derived from investment is taxed as regular income to the recipient. IRA's and 401K's are also handled outside the estate so long as decedant's estate is solvent. There has to be another financial problem with the deceased, such as unpaid taxes or debts, that can't be managed by liquidating the assets within the estate when it impacts on the IRA's and other accounts that pass due to survivorship.  If you fail to designate a valid beneficiary, annuities will be liquidated and taxed as of their cash value upon conversion.

Would the beneficiary be taxed on the total valuation of the annuity at the time it's received if it's large like MM or PB? 

Or are those periodic annuity payments considered taxable ordinary income to the beneficiary?

Good luck to everyone!

    United States
    Member #5565
    July 11, 2004
    260 Posts
    Posted: February 27, 2006, 7:15 pm - IP Logged

    I think the beneficiary can still elect to take the remainder of the annuity as a lump sum at the time of death.  In the case of a guaranteed annuity like Win For Life, the survivor would only receive payments for the duration of the guaranteed period, not the remainder of their life. The designation of a beneficiary bypasses the estate tax.  Whether received as a lump sum or an annual payment, it'll be taxed as ordinary income.


    There was a recent tax law that concerns the taxation of lottery winnings.