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I am trying to advise a relative on her options for a insured variable annuity that she bought 6 years ago through a full service broker. Of course the fees are very high, and she wants a better deal. The annuity is invested in several mutual funds. It has just passed the surrender period so she can avoid any penalties that might apply.

I've told her that it might be best to replace the current annuity with a low cost one from Fidelity, but I'm not sure if that would trigger taxes or some other problem and I'm not sure how to execute the move. It's also very possible that she will never need the money, so the inheritance implications are important. I know the rules around inherited IRAs but have never heard anything about inherited annuities. How do the taxes work when that happens?

Any help would be greatly appreciated.

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