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Is an annuity death benefit taxable to the beneficiary?

Quick Answer

When you die, your survivors will typically owe income taxes on any death benefit they receive.

If you die during the accumulation period, a deferred annuity with a basic death benefit pays some or all of the annuity’s value to your survivors (called beneficiaries) either in one payment or multiple payments over time. The most common death benefit is the contract value or the premiums paid, whichever is more. A company may waive the surrender charge when it pays a death benefit.
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Questions & Answers

QuestionAnswer
What tax rules apply after an annuity contract holder dies?The Internal Revenue Code also has rules about distributions after the death of a contract holder.
Does the company subtract tax from a death benefit?The company may subtract the amount of the tax when you pay your premium, when you withdraw your contract value, when you start to receive income payments or when it pays a death benefit to your beneficiary.
Is tax-deferred annuity growth the same as tax-free?Income tax on annuities is deferred. That means you aren’t taxed on any interest or investment returns while your money is in the annuity. This isn’t the same as tax-free.

Related Questions

Large Print Version

Is an annuity death benefit taxable to the beneficiary?

When you die, your survivors will typically owe income taxes on any death benefit they receive.

What tax rules apply after an annuity contract holder dies?

The Internal Revenue Code also has rules about distributions after the death of a contract holder.

Does the company subtract tax from a death benefit?

The company may subtract the amount of the tax when you pay your premium, when you withdraw your contract value, when you start to receive income payments or when it pays a death benefit to your beneficiary.

Is tax-deferred annuity growth the same as tax-free?

Income tax on annuities is deferred. That means you aren’t taxed on any interest or investment returns while your money is in the annuity. This isn’t the same as tax-free.

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Annuities Explained is not affiliated with or endorsed by the National Association of Insurance Commissioners (NAIC).

Educational content provided by Jeffrey Scott McLeod, LUTC, National Insurance Producer License #558629. This is for informational purposes only and is not a recommendation to buy or sell any annuity. Guarantees are subject to the claims-paying ability of the issuing insurance company. Always consult your own advisor and read the full NAIC Buyer’s Guide. For residents of your state. Jeffrey Scott McLeod, LUTC — National Producer #558629. Questions? Contact Jeff@AnnuitiesExplained.org.