Estate Law Questions? Ask an Estate Lawyer.
Welcome! Thank you for your question.
Since this annuity is a non-qualified annuity it was purchased with post tax dollars. There is no 10% tax penalty and your age has nothing to do with anything on a non-qualified annuity. Any penalty is because of the annuity contract itself and has nothing to do with the tax code.
The basis in the annuity is equal to the initial investment of $21,000. If the Cash surrender value is $20,194.82 then that is the amount that you should be able to withdrawal under the contract to surrender the annuity policy The reason the cash surrender value is less than the amount placed in the policy is because there is a surrender charge that is being charged by the annuity company. This is based on the contract requirements to keep the money in the annuity for so long. The "penalty free amount" is the amount you can withdrawal and not pay a contract surrender charge.
Since the basis is $21,000 you will have to pay income tax on the annuity for all amounts that you withdrawal over $21,000. An annuity is taxed different than stock or other investments so it is ordinary income tax that is applied for all income that is distributed from the trust. The amount of income that is taxable if you withdrawal $20,194 is $ since the basis is $21,000 ($21,000-$20,194).
I cannot provide you with legal advise. I can provide you with information about the law related to your question. My answer, and any information that you can find online, should not take the place of having a detailed consultation with a lawyer in your area to advise you regarding your specific issues.
Please show your appreciation for my candid, accurate information by clicking VERY INFORMATIVE, OR the OR and positive feedback. You should only rate me if you are satisfied with the information I provided you. If you feel there is something more I could have done please do not rate me and click REPLY TO EXPERT.
I appreciate your question and repeat customers. You can request me by beginning your question with "Dear XXXXX..."
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).