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Avoid Annuity Tax Problems
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 |
Tax Related News
Middle-class Tax Relief (The Decatur Daily)MONTGOMERY — If you make less than $100,000 per year, you could save anywhere between $25 and $375 from Gov. Bob Riley’s proposed income tax cuts. The amount will depend on your marital status, number of dependents and income.
District Seeks To Send Message With Tax Plan (The Express-Times)U. MT. BETHEL TWP. | The Bangor Area School Board last week formalized a new taxing proposal despite scores of people opposing the plan. District voters will decide in May whether to create a 1.65 percent personal income tax in exchange for an estimated $537 in property tax rebates.
Webcast To Discuss New Tax-Exempt Legislation (SmartPros Accounting)March 12, 2007 (SmartPros) This month's edition of Tax Talk Today, a Webcast sponsored by the Internal Revenue Service, will feature information on changes affecting tax-exempt organizations, the people who donate to those organizations, and tax-related property appraisals of donated items.
Technology And Tax Filing (CBS News)It's tax season, and with all the options out there, filing can be a little confusing. Ray Hennessey, Editor of SmartMoney.com, offers some advice on using tax software to file and when it may be best to file with a tax pro.
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