menu

Inherited Annuity: A Boon or a Bane?



video
Annuity plans may make sense to the original who bought it but it may not mean anything to those who inherited it. It may be that the heir is in an income tax bracket higher than that of the original plan holder and small payments for him are rather insignificant. In this case, selling the inherited annuity is a good option.

Another good reason to sell inherited annuity is the tax that comes with it. Income from the inherited annuity is not free of tax. You would be taxed as your benefactor was taxed before. There are cases wherein the inherited annuity could put you in a higher tax bracket and prompt a costly tax bill that should be paid within the period of five years except if you choose to take the money over time.

Annuities are not like other inheritances, which cost minimal or at least acceptable taxes when sold later. Inherited annuities generally cost more because they fall under ordinary income tax with a ceiling of resounding 35 percent, which applies to all gains upon distribution. What’s more, they are included in the taxable estate. So the key question to ask is the how the annuity was paid.

If the annuity was purchased by an employer to give to the original owner as part of his benefits, then 100% of every payout would be taxed in the heir’s top income-tax bracket. This rule also applies if pretax money was used to buy the annuity; pretax money like from Individual Retirement Account. However, if the annuity was bought with after-tax money, some portion of every payout received by the beneficiary would be tax-free return of principal—only the earnings part of the annuity is taxed.

The taxing process gets even trickier if the heir of the annuity is not a spouse. A spouse heir or beneficiary simply takes over the annuity in what they call “spousal continuation”. Here, the heir simply becomes the owner of the contract and can avail of the deferred payouts for as long as he or she intends to, whereas, nonspouse heirs of the annuity do not have that option.

Nonspouse heirs have three choices. Either they withdraw all funds from the contract within five years following the death of the original owner of the annuity and pay the taxes that go with it; or annuitize the contract for guaranteed payments throughout your life; or start withdrawals on a regular schedule depending on your life expectancy. And of course, there is a fourth choice, and that is to sell your inherited annuity.

Majority of people who inherit annuities opt to sell or withdraw, if they are allowed, in a lump sum and be done with it. The nitty-gritty of taxes always turn people off, if not totally scare the wits out them. Tax is properly named for the taxing or exhausting procedures and calculations it entails.

Not to mention the frustration and distress over the considerable amount of that you have to let go and which could spell a big difference if you are to keep it. People sell their inherited annuity because they prefer to have a larger lump sum of money rather than receive small payments.

In their minds, a one-time lump sum payment would better utilize the saved money by putting it in other income-generating investments.





By your GoodBuddy Richard La Compte
You may contact me through my Help Desk

Comments

*Name:
*Email:
Website URL:
Title / Subject:
Hide my email
*Comments:
*
 



Menu


My Articles

Formulas In Selling Your Annuities
Sell Retirement Annuity For Lump Sum Payment
Client-Focused Selling: The Key To Selling Annuities
Steps In Selling My Annuities
Is Selling Your Annuity Settlement The Ultimate Solution?
Inherited Annuity: A Boon Or A Bane?
Sell Your Annuities Right
Useful Facts About Annuity Selling
Sell My Annuity Payments
Guide To Selling Annuity Payments
Sell Tax Deferred Annuity
Understanding Your Rate Of Return
The Basics You Have To Know In Selling Annuities
Where To Sell Annuities Connection
Sell Annuity Comparison For Cash
The Best Ways To Sell Your Annuity
Facts On Selling Annuities
Selling Annuities
Sell Annuity Payment To Refinance Home Loans
How To Easily Sell Your Annuity Payments
Reasons To Sell Structured Settlement Annuity
What You Need To Know When Selling Annuity
Should You Sell Annuity Payments?
Sell Annuity Settlement: The Basic Guide



loading...




   Related Sites

My Articles


Facts On Selling Annuities The Benefits of Selling Annuities. Selling annuities offer potential for..


The Basics You Have To Know In Selling Annuities A huge emergency had just happened in your household and you are in..


Is Selling Your Annuity Settlement The Ultimate Solution? Sometimes we are beset with monetary problems that we get..


How To Easily Sell Your Annuity Payments Some businesses purchase annuities from investors who need..



Related Products:

Related News:

 
This RSS feed URL is deprecated
Fri, 19 Oct 2018 19:47:03 GMT
    This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

Mega Millions: Where to buy tickets, what it costs, how to pick numbers for Friday's record jackpot drawing - Cincinnati.com
Fri, 19 Oct 2018 13:20:20 GMT
    

Cincinnati.com

Mega Millions: Where to buy tickets, what it costs, how to pick numbers for Friday's record jackpot drawing
Cincinnati.com
On Saturday morning, someone could wake up a billionaire thanks to the Mega Millions drawing. On Friday afternoon, the jackpot skyrocketed to $1 billion dollars, a record high for Mega Millions. The jackpot was at $970 million on Friday at 9 a.m..
Customers take their chances at winning historic Mega Millions jackpotSpringfield News Sun
Mega Millions jackpot reaches $1 BILLIONKOAA.com Colorado Springs and Pueblo News
As lottery jackpots climb, retailers are the real winnersMichigan Radio
The Epoch Times
all 2,659 news articles »


After Ohio National decision, the fine print of annuity trails is now a must-read - InvestmentNews
Sat, 13 Oct 2018 13:03:51 GMT
    

InvestmentNews

After Ohio National decision, the fine print of annuity trails is now a must-read
InvestmentNews
It's still a fresh sting, hearing that Ohio National Financial Services Inc. plans to terminate servicing agreements and cut off trail commissions to broker-dealers that sell some of its variable annuities. Can they really do this, some B-Ds wonder ...