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Shawn P Adamo
Shawn P Adamo, Retired CPA
Category: Finance
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Experience:  Retired CPA
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My mother is 80 years old and has a fixed annuity of $90,000

Customer Question

My mother is 80 years old and has a fixed annuity of $90,000 that will be coming due soon. She had set up the annuity originally to offset possible expenses if she had to go to a rest home--but she in in good health at this point.

I spoke about this recently with her and she wondered what possible options that she might have at this time. A great deal of the value of the annuity is interest on interest that has been accumulated over time and would be subject to taxation if she were to liquidate the annuity presently. Obviously, these tax considerations would be a prime factor in any future actions. She has an income from pensions, IRA's of about $30,00 per year which she have lived off of for the past 15 years.

Her will is set up to splilt her estate between myself and my brother and sister.

What other information would you need to provide me an answer?
Submitted: 1 year ago.
Category: Finance
Expert:  financeguru2 replied 1 year ago.

financeguru2 :

To clarify, is your question whether she should liquidate the annuity or stay with it? Obviously the tax benefits to staying with it would be the deferral of untaxed income inside the annuity. I believe the only other information that is relevant is the rate of return on the annuity vs. what she could achieve with other options with the same risk level. Feel free to post the income or rate of return generated by the annuity for a conclusive answer to your question. Thank you.

Expert:  Shawn P Adamo replied 1 year ago.

Hello. My specialty is focusing on YOUR Financial needs. Financial Planner/Business Owner for 20 years. CPA,PFS,QFP,GMMA.

If she were to exercise a 1035 exchange from this to another annuity taxes would be deferred.

She could do such a transfer (and possibly get an upfront tax deferred bonus) or keep the money where it is or convert it to an income stream (period certain to guarantee the preservation of principal and interest to date).

Does she need the money?

What if she cashes out (her tax rate will be lower than yours I assume) and uses tax free municipal bonds?

Customer: replied 1 year ago.

Shawn,

So, I am assuming that with a period certain annuity, if my mother were to die before the end of the designated time period, the annuity assets would go to her estate? This would be subject to estate tax? Any other taxation due? (i.e.-taxes on the recipient of those assets?)

Customer: replied 1 year ago.

Not sure if you saw my follow up question--I didn't get a response:

So, I am assuming that with a period certain annuity, if my mother were to die before the end of the designated time period, the annuity assets would go to her estate? This would be subject to estate tax? Any other taxation due? (i.e.-taxes on the recipient of those assets?)

Customer: replied 1 year ago.

 


Not sure if you saw my follow up question--I didn't get a response:

So, I am assuming that with a period certain annuity, if my mother were to die before the end of the designated time period, the annuity assets would go to her estate? This would be subject to estate tax? Any other taxation due? (i.e.-taxes due from the recipient of those assets?)

Expert:  Shawn P Adamo replied 1 year ago.

it Could go there. It could also go to people direct,ly (skips probate).

IF ESTATE, ESTATE PAYS TAXES ON GAINS, IF PEPOPLE, THEY PAX THE TAXES ON GAINS.

NO BIG DIFF.

Shawn P Adamo, Retired CPA
Category: Finance
Satisfied Customers: 1270
Experience: Retired CPA
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