Message Font: Serif | Sans-Serif
No. of Recommendations: 1
My grandfather passed away last year and I received an inheritance from his Trust. The proceeds came to me in cash, but contained in the Trust, among other things, was an annuity that was cashed in at his death. Although I believed inheritances to be non-taxable (to the recipient), the Trustee (his bank) has told me that I will receive a K-1 statement showing the taxable portion of the annuity that I will be required to pay taxes on.

Is this correct?

My condolences on your loss.

Yes. Proceeds from an annuity (just like proceeds from an inherited IRA) are considered Income in Respect of a Decedent (IRD). Since the receipt of the distribution would have been taxable to your grandfather, had he been alive to receive it, it is taxable to you. If there was any estate tax paid on the estate, you may be entitled to a tax deduction for the part that is attibutible to the annuity. You'll have to get that information from the estate's executor.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.