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.
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: http://www.stevenzelinger.com/
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 Tax laws are changing so fast that the answer could be outdated by the time you actually need the answer.
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