Avoid Annuity Tax Problems
Tony Novak
Millions of investors own retirement annuity accounts but few are aware of the tax implications when the annuity is passed to an heir or beneficiary. A little known tax fact is that income tax on an individually owned annuity can be postponed only if the account owner's spouse is named as the sole beneficiary. If the annuitant is not married, the same treatment may be obtained through the use of a trust account. Any other designation of the account beneficiary will cause the proceeds to be immediately taxable in the year of the account owner's death. The results can be financially devastating, triggering huge current tax liabilities that would have otherwise been avoided. Most beneficiary designations are made at the time that the annuity account is opened, often without the advise of a professional tax adviser. The investment representatives who typically open these annuity accounts give the blanket recommendation to investors to "seek advise from your own tax adviser" but few investors ever bother to seek separate tax advice. Investors often assume that the financial planner opening the annuity account is incorporating tax advice into the service provided, but usually this is not the case. By the time the tax problem is discovered by the executor or the estate, it is too late to make any correction.
Tony Novak is an independent writer and financial adviser in Narberth PA who provides OnlineAdviser services through MedSave.com and FreedomBenefits.org
On the pages of this web site you will find additional tax information that has been collected from many independent sources. Each article or news item offers a different point of view, but not necessary the CPA Moms.
This information is for general information only.
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If you desire to ask a specific question, feel free to contact me.
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“CPA - Tax Moms” are trade names given to Accounting and Tax Professionals who chose to work in an “relaxed” environment. 
