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My mom died and had a living trust with some Annuities.   I received the death benefit ($90k, her initial investment was $40k) for the annuity.   Do I need to report the income and on what form?   I was told that if her estate in a living trust was under a certain dollar amount, I did not need to pay inheritance tax.

Submitted: 590 days and 17 hours ago.
Category: Tax
Value: $15
Status: AWAITING CUSTOMER ACTION
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San Marcos, California

Posted by Lou 590 days and 16 hours ago.

Answer

Hello and thank you for contacting Just Answer. We appreciate the opportunity to be of service to you.

Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) with a total value under $1,000,000 do not require the filing of an estate tax return. The amount was $1,500,000 in 2004 and 2005. For 2006 through 2008, the amount is raised to $2,000,000.

So if her estate value did not exceed those limits there is no inheritance tax.

However you should receive a 1099 from the insurance company that will indicate how much of the amount you received is taxable. How you report that income will be determined by the type of 1099 you receive. Have you received a 1099? If so what type 1099INT, 1099R, etc.

Generally the the amount received in excess of what was paid in (basis) will be taxable as ordinary income in the year received.

590 days and 16 hours ago.

Reply

Reply to Lou's Post: Lou,

Have not seen a 1099, but did get a Financial breakdown with Gross amnt, FED tax withheld, State tax withheld, and net amount.

If this has been a checking account, rather than an annuity, I assume there would be not ordinary income to me.   Is that correct?

590 days and 16 hours ago.

Reply

Lou,

My wife found the 1009-R, but the social Security number on it is my Mom's.   Should I show the ordinary income on my Mom's final tax return or mine?

And there are two other annuities that I deferred up to 5 years, will they go on my mom's taxes or mine?

Posted by Lou 590 days and 14 hours ago.

Answer

If it has her SS# on then report the 1099R you received on your mother's final tax return. She may not have named a beneficiary or named the Trust as the beneficiary.

Who is the owner of the other two annuities? Who is the annuitant? Who is the beneficiary?

590 days and 13 hours ago.

Reply

Reply to Lou's Post: Lou,

Thanks... I believe the other two annuities are setup the same.   They have me as the Trustee and Beneficiary.   That is why I am surprised the first one came with my Mom's SS on it.

I assume since this year will be my Mom's final return, any monies from the other annuities will be on my taxes.

Posted by Lou 590 days and 12 hours ago.

Answer

Most likely, however double check the 1099's when you get them.

Is there any special reason you deferred the others for 5yrs?

590 days and 12 hours ago.

Reply

Lou,

Just to defer the tax obligation, looks like a mistake now...

Especially if it would have been under Mom's SS with no other income.

Accepted Answer

Perhaps but what is done is done. Will you need the entire lump sum in 5 years?

Check w/the insurance company to see if you can take some form of life income. Then it may be taxable only as you receive it. Of course that also depends on your current age and need for the cash. Just FYI check with the insurance company to see what opptions you may have in 5 years.

If my answer has been a benefit to you please "ACCEPT" and as always positive feedback is always greatly appreciated.

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Expert: Lou
Pos. Feedback: 97.0 %
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Answered: 4/11/2008

Tax Preparer

25+ yrs Experience Personal Income Taxes - Former DM for H&R Block in California

590 days and 9 hours ago.

Reply

Lou,

Thanks. I have accepted and added some.

I don't need it in 5 years, but I am told I must take it all in that time or lose it.

Posted by Lou 590 days and 6 hours ago.

Answer

Ok. It's been a pleasure to work with you.

Good Luck

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