Question is about inheritance tax on inherited monthly annuity payments. My mother inherited from her aunt an annuity in the amount of $2050/month until December 2020. Therefore, the most payments she will receive is 58. The valuation she was given of the annuity was based on her life expectancy of 9.8 years and 118 payments. Is this correct? Why would it be valued on 118 payments when she will only ever receive 58 payments? I would think the value would be based on the 58 payments; otherwise it seems she is paying inheritance tax on money she will never receive. Any insight would be greatly appreciated.
To provide the correct answer to your question, I suggest that you retain an attorney to review the paperwork and provide their opinion.
In general, the original investment of the decedent passes to the beneficiaries free of tax and the investment income part is taxable. The distributors of annuities (usually insurance companies) have qualified tax specialist who can split each distribution between the two and advice you free of charge. The information presented herein is for general purposes only. It is not intended to, and may not be construed as legal, tax or accounting advice. For specific advice, please consult a attorney in person. Good luck. Zaher Fallahi, Tax Attorney, CPA (California).
If your mother inherited an annuity that her aunt had already annuitized over a term of term of years, then it appears that the valuation she received is of an annuity for life, which would be in error. Your mother can contact the company that issued the valuation and ask that it be recomputed, or she can retain an attorney or other advisor to assist her in correcting the valuation.
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