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You'll have to get more info on the annuity
Posted on: March 21, 2023 at 13:18:45 CT
BigDave MU
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It could have been paid for with either pre-tax or post-tax funds. It makes a difference. If pre-tax (qualified annuity), tax will be paid on the entire $25k. If post-tax (or non-qualified annuity), only the portion that relates to earnings will be taxable. The company can help you with that, and that is the only way to find out what will happen after death.
The amount of tax will be at their ordinary income tax rate.
Life insurance is not taxable and does not have to be reported on their tax return.
One option on the annuity, assuming it is a qualified (pre-tax) annuity, is to roll it into an inherited IRA if they can. That would allow them to spread the payments out over 10 years to avoid being hit with $25k in taxable income in a single year.
The amount of tax will be at their ordinary income tax rate.
Life insurance is not taxable and does not have to be reported on their tax return.
One option on the annuity, assuming it is a qualified (pre-tax) annuity, is to roll it into an inherited IRA if they can. That would allow them to spread the payments out over 10 years to avoid being hit with $25k in taxable income in a single year.
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You'll have to get more info on the annuity - BigDave MU - 3/21 13:18:45
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