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I and my sister are trustees of my mothers Lifetime Irrevocable…

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I and my sister are...

I and my sister are trustees of my mother's Lifetime Irrevocable Trust (though 4 of us are the beneficiaries of the trust). It is a Grantor Trust. My mother is in a home for dementia care and we just sold her apartment, which was in the trust. The question is: If we buy an annuity and she dies before it matures, will we have to pay income taxes on the interest as part of our income (we are well under the amount for estate taxes to kick in). I read somewhere that that interest earner in an inheritance from an annuity is taxable to those who inherit, but the lump sum payment would go directly into the trust, and then be distributed along with the rest of the trust. The answer to this question would determine whether we buy this, or put it into CDs. Peter Wolf

Submitted: 8 years ago.Category: Estate Law

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3/28/2011

Estate Lawyer: John Elder, Estate & Elder Law replied 8 years ago

John Elder, Estate & Elder Law

Category: Estate Law

Satisfied Customers: 4,632

Experience: Over 14 years experience in Medicaid, Estates, Trust.

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Thank you for asking Just Answer,

If you buy an annuity and she dies before cashing it in then the beneficiaries of the trust will have to cash in the annuity to distribute the proceeds and the beneficiaries of the trust will have to pay income tax on the gain of the annuity as regular income to the beneficiaries. Because of the tax impact of annuities I prefer CDs or Bonds as investments for older individuals.

John Elder, Estate & Elder Law

Category: Estate Law

Satisfied Customers: 4,632

Experience: Over 14 years experience in Medicaid, Estates, Trust.

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