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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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My 82 year old mother has an estate valued at approx $500,000

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My 82 year old mother has an estate valued at approx $500,000 which consists primarily of four tax deferred annuitites with her three children listed as beneficiaries. My siblings are concerned about the tax liabilty involved at the time of her passing. We reside in the state of Florida. Can you explain to me how the tax liability is handled on the profit derived from these annuities? Thank you.
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.

As a recipient of an inheritance - you do not need to claim it as income. Regardless of the value. Please see for reference IRS publication 525 page 34 (left column)-

Gifts and inheritances. Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you.


However - the distribution from tax deferred accounts will be taxable. If you mother made payments into annuities with after-tax funds - these will be distributed tax free - but all earnings will be taxable.

Depending on your policy - you basically have three options:
-- Lump-sum payout
-- Full payout over the next five years
-- Annuitize over your own lifetime

If your mother already started the annuity payments - you must take payments at least on the same level.

Let me know if you need any help.


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