Annuities are insurance policies taken out to ensure you get a set amount of money for life after you reach a certain age. Some defer this payment .
All states levy tax against any inherited annuity eve if you are the named beneficiary. Some states have access to the annuity on death of the person. Pennsylvania is one of these and so taxes the annuity on death. The tax taken out of the annuity is paid on the total value of the annuity and it doesn’t matter what income tax is owed. Taxes are not estimated or taken from an annuity depending on the estate for inheritance tax amount.
In Pennsylvania you will have to pay this tax on receiving the annuity as the federal government has already taxed it on death.
Outside of Pennsylvania, you can receive the annuity payment in a lump sum or a monthly payment. If you receive the lump sum the tax on the annuity will be due in full. If monthly payments are received it is taken out on a monthly basis.
To help and lower the impact of tax you should talk to the annuity owner before their death. If they don’t want to spend the annuity before death, the money can be transferred to you before death and you can avoid the inheritance tax.
If the owner of the annuity is your spouse you also avoid having to pay tax on the annuity. If the owner is not your spouse you will have to pay tax and are also subject to a 10 per cent penalty if the transfer is done before the person is 59 and a half years old.
The best person to consult about this is the person who owns the annuity and a solicitor. After death a solicitor is also very useful on hand and may help reduce the incidence of tax.
All states levy tax against any inherited annuity eve if you are the named beneficiary. Some states have access to the annuity on death of the person. Pennsylvania is one of these and so taxes the annuity on death. The tax taken out of the annuity is paid on the total value of the annuity and it doesn’t matter what income tax is owed. Taxes are not estimated or taken from an annuity depending on the estate for inheritance tax amount.
In Pennsylvania you will have to pay this tax on receiving the annuity as the federal government has already taxed it on death.
Outside of Pennsylvania, you can receive the annuity payment in a lump sum or a monthly payment. If you receive the lump sum the tax on the annuity will be due in full. If monthly payments are received it is taken out on a monthly basis.
To help and lower the impact of tax you should talk to the annuity owner before their death. If they don’t want to spend the annuity before death, the money can be transferred to you before death and you can avoid the inheritance tax.
If the owner of the annuity is your spouse you also avoid having to pay tax on the annuity. If the owner is not your spouse you will have to pay tax and are also subject to a 10 per cent penalty if the transfer is done before the person is 59 and a half years old.
The best person to consult about this is the person who owns the annuity and a solicitor. After death a solicitor is also very useful on hand and may help reduce the incidence of tax.
