Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.
First of all there's no Federal ESTATE tax for deaths in 2010. You most likely will be subject to income tax on at least a portion of the annuity proceeds, the annuity company can tell you how much. As far as New Jersey goes, what is the amount of the annuity payment(s) that you received? What the annuity company probably meant to tell you was that since you were a beneficiary under the annuity, the annuity was not part of the PROBATE estate; it would however be part of the taxable estate, but may or may not be subject to NJ estate and/or inheritance tax.
Note that's a difference between inheritance (taxed to the recipient) & estate taxes (taxed to the estate).........depends upon the amount & whether NJ follows the Federal rules or not..........I'll check on this as soon as you give me the amounts......
Do you understand?
Was your mother-in-law a resident of NJ when she died?
Yes. The total value received from the two annuity's was $27,517.00.
She was a NJ resident
ok, just a minute.........
Did your spouse also inherit anything or isn't she alive or what were the circumstances? If she had inherited the annuity there would have been no inheritance tax. Also, not that the 10% "penalty" you speak of is actually interest computed at the rate of 10% per year, not a 10% penalty a month.
My wife did not inherit any benefit
OK, then you will have the 15% inheritance tax, as well as income tax depending upon how much of the annuity proceeds are taxable for income tax purposes, which the annuity company will have to tell you; there should be no estate tax that you have to be concerned about as you would be unable to determine it without knowing the entire value of the estate, not just what you inherited.
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If you have any follow-up questions, I'll be happy to answer them.
thanks very much..........note......the reason I asked about your wife is that if she were deceased, as her surviving widower you would not be subject to the inheritance tax ..........