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Old 05-04-2014, 12:10 AM
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Annuity

A non qualified deferred annuity has a trust as beneficiary. At owner's death is all of the gain inside the annuity taxable or does the surviving spouse have the option to take over ownership and continue the tax deferral with no immediate tax due until the surviving spouse's death? Which code section allows this? I believe spousal continuation rules allow continued deferral.



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Old 05-04-2014, 11:40 PM
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Originally Posted by FBN2014 View Post
A non qualified deferred annuity has a trust as beneficiary. At owner's death is all of the gain inside the annuity taxable or does the surviving spouse have the option to take over ownership and continue the tax deferral with no immediate tax due until the surviving spouse's death? Which code section allows this? I believe spousal continuation rules allow continued deferral.
A non qualified deferred annuity has a trust as beneficiary. At owner's death is all of the gain inside the annuity taxable or does the surviving spouse have the option to take over ownership and continue the tax deferral with no immediate tax due until the surviving spouse's death?==========>>>>>>>>> non-qualified annuities can be funded with post-tax money. Non-qualified accounts are those offered through independent companies not affiliated with your employer. Unlike qualified annuities, however, you cannot get tax deductions for deposits into non-qualified accounts. Taxes are due when the money is withdrawn from the account, but there are some ways to put off paying taxes on an account when the owner dies; Upon the death of the account holder, the beneficiary must immediately choose one of several options. The trust can choose to receive a lump sum or to completely withdraw all the money within a span of five years. If the beneficiary is the surviving spouse, he may choose to start annuitization over the course of his lifetime. The spouse may elect to continue the contract and avoid IRS taxes. under the spousal rule that allows the surviving spouse of the account holder to continue the annuity contract, the living spouse will continue the contract as the new owner of the account. If no money is taken out, no tax penalties will emerge. This is one way to delay any IRS taxes on the retirement funds. The rule only applies to spouses, not to other relatives or business partners.
note; Some states I guess PA state, levy inheritance taxes on taxpayers based on the amount of the inheritance received. The inheritor receiving the annuity must file the appropriate state tax forms to report inherited income. Federal tax law taxes the transfer of wealth from one generation to the next only at the estate and does not have a separate inheritance tax
Which code section allows this? I believe spousal continuation rules allow continued deferral.==========>>>>>> Publication 17 (2013), Your Federal Income Tax



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