Annuities and Estate Planning
Estate Planning (07/01/02) p.360; Leimberg, Stephan R.; Gibbons, Albert E.

Investor interest in the taxation of annuities has increased, and a Community of Annuity Insurers survey indicates that most annuity owners use them to save for retirement and plan to have them pay out during retirement. If an annuitant dies before the annuity payout begins and the death benefit is payable to the annuitant's estate, the value of the benefit must be included in the gross estate for federal estate tax purposes, and it generally will be included even if the death benefit is payable to a named beneficiary. Its value should be taken into account during estate planning due to the value. Estate planning can also be affected by the basis of a nonqualified annuity asset, since changes in the tax laws have created basis allocation choices. The new regulations dealing with qualified assets are easier to work with and have lower minimum amounts, so it is more likely that a balance will remain after a plan participant's death, and beneficiary designations should be handled so as to minimize taxation. Private annuities have no value after the annuitant's death, and so have no involvement in estate taxes.


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