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RayAnswers
RayAnswers, Attorney
Category: Estate Law
Satisfied Customers: 36952
Experience:  Texas lawyer for 30 years in Estate law
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My mother passed away 4/17/15 and left me beneficiary to 2

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My mother passed away 4/17/15 and left me beneficiary to 2 annuities totaling about $125K. I live in SC and my only income is Social Security. Will I have to pay taxes on this inheritance?
Judith Dewhirst ***@******.***
Submitted: 1 year ago.
Category: Estate Law
Expert:  RayAnswers replied 1 year ago.
Hi and welcome to JA. I am Ray and will be the expert helping you today. There are taxes due on an inherited annuity.The amount depends on which option you take here, lump sum, full payout over the next five yearsor elect with 60 days, to annuitize over your own lifetime.These are taxes on the annuity or the income from it rather that any inheritance taxes.You need to talk to your tax preparer about what is best for you and you have to do it pretty quickly.The lump sum here gives you the most money now but the highest taxes as well. The other options allow you to defer the full amount of the taxes and spread out the tax hit.But it also depends on how bad you need the money now.If you have a pressing need then you may elect to pay the higher taxes for right to use the remaining funds.But going over these three optionswith your tax preparer is a great idea to understand what you need to withhold here. I appreciate the chance to help you today.Please let me know if you have more followup.Thanks again. Reference. http://www.investopedia.com/ask/answers/09/inherited-annuity-distribution.asp
Expert:  RayAnswers replied 1 year ago.
Summary of your choices.. ) Take an immediate lump sum – all earnings still remaining in the annuity are taxable in the year in which they are received. This tends to have the highest tax impact if tax rates stay the same over the next several years.2) Complete withdrawals within 5 years of death – taxed as Last In First Out (LIFO), in otherwords the first withdrawals are considered to be earnings – once all of the earnings are taken out, all additional withdrawals are considered return of principal and are not taxable.3) Annuitization over the life of the beneficiary which must be selected within one year of death. Selecting this option is going to have the least tax impact as the earnings are spread out over the life of the annuity.
Expert:  RayAnswers replied 1 year ago.
Thanks again for the chance to help you today.
Expert:  RayAnswers replied 1 year ago.
There would also be state income taxes on this depending on which option you choose here. Personal income taxSouth Carolina collects taxes from its residents at the following rates over six income brackets:There is no tax assessed on the first $2,880 of taxable income.3 percent on taxable income between $2,881 and $5,760.4 percent on taxable income between $5,761 and $8,640.5 percent on taxable income between $8,641 and $11,520.6 percent on taxable income between $11,521 and $14,400.7 percent on taxable income of $14,401 and above.Thanks again.
Expert:  RayAnswers replied 1 year ago.
If you can leave a positive rating it is always much appreciated.

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