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Subject:  Re: Term Certain Annuitization - Inherited Annui Date:  9/20/2012  4:52 PM
Author:  inparadise Number:  116639 of 127549

The beneficiary is considering a 5 year, term certain payout as an alternative to a lump-sum payment and trying to understand the income tax consequences. An illustration provided by the issuer of the annuity says that 63% of each payment is subject to income taxes. This suggests that the LIFO rule does not apply in this case and the tax consequences are relatively straight forward. Is this correct? Does the age of the beneficiary impact the tax status of a term certain payout?

I could very well be wrong about what I am going to say, so treat it as a starting point for research if the possibility is interesting. When Dad died I inherited all sorts of accounts, one of which was an annuity that was partially tax deferred. I was, IIRC, able to roll over the tax deferred portion into an inherited IRA. It was a confusing time, and I basically just sent the paperwork to my financial planner to deal with and decode, but I could swear that I took the funds that were not tax deferred and rolled the tax deferred funds into the inherited IRA.

Sorry to be so uncertain. It really wasn't the best time for clear thinking.

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