Thank you for getting back to me.
The death benefit is not taxable.
But annuity payments are.
If you inherited a death benefit that would not be taxable at all.
there is no inheritance tax on the annuity payments but whether you continue the structured payments or a lump sum, all distributions or payments other than death benefits woudl be subject to income tax at your marginal rate.
But please follow:
You have the option to coninue any annuity payments started by the person you inherited from or withdraw all the money within five years, or to set up an income stream for a set number of years or over your life expectancy
If youi choose the five-year option, you can take all the money tomorrow, take several withdrawals over the next five years, or wait until the end of the period and withdraw it all at once. Any money left in the annuity continues to grow tax-deferred. Under this option, any money you receive will be fully taxable until you have withdrawn all of the earnings. After that, all withdrawals would be tax-free.
The taxes owed would be only on the difference between what was invested by the decedent and the total payments received.