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When is an annuity considered life insurance for death benefit

Perkasie, PA |

Dad purchased an annuity with ING in one lump sum in the 1990's and didnt add to it after that. The annuity starting date would have been on his 90th birthday. It was a "deferred combination variable and fixed annuity" (no dividends) and it was non-qualified. He chose annuity option "Life 10 year certain". There was a fixed amount for death benefit, which was 20% more than the initial premium. The ING booklet says "if the annuity start date occurs when the annuitant is at an advanced age, i.e. over age 85, its possible that the Contract would not be considered an annuity for federal tax purposes." Another page adds: "in that event, income & gains could be includible in current income." Does any of this mean it would be considered life insurance payout & not taxable to beneficiary?

Attorney Answers 3


You need to have an attorney read the entire policy to make sure. If it is life insurance it would not normally be considered income, but any interest that accrued from date of death forward would normally be considered income. Also, if he used pre-income income normally the distribution will count as income. It may be considered an asset for purposes of inheritance tax and federal estate tax.

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Would have to review the documents to determine. I believe your question mostly revolves around whether this asset is included in the taxable estate for PA inheritance tax purposes or not as it may be life insurance to a named beneficiary? It is important to know the answer so see an attorney to determine the answer.

This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. This attorney may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature. Visit Steve Zelinger's website:

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I agree that you could get the answer from an attorney, but it sounds like your question is academic and that neither the annuity has kicked in, nor has your Dad passed away. Under the circumstances, if I'm reading the question right, I would check with ING first and if you have an accountant, you could ask him or her. Tax laws are changing so fast that the answer could be outdated by the time you actually need the answer.

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