Received letter from attorney of estate to send me an advanced payment on an annuity.

[XAM330]

I received a letter from an attorney about an advanced payment on a non-qualified annuity in an estate. This annuity has 3 beneficiaries and they want to send me a check for $33,000.00. Attorney said they would issue a K1 next year. I am unfamiliar with a K1 and am trying to see how this changes my AGI. I have added the $33,000 to my gross and it will push me up another bracket. I am not sure if this is correct since the $33,000 is actually less than 1/3 of the total account balance and is more than 1/3 of what I should get after they paid the inheritance tax. Also since it is non qualified the tax is on the gain only as far as I know based on another annuity I received but it did not go through an estate. In testing with $33,000 added to gross I move to the next bracket a good way and then this amount will leave only $100.00 left from the standard deduction + senior deduction. It will also reduce the $6,000.00 bonus for 2025. I have very stable income so I estimated for next year, which will be a lower gross and much lower tax for me. I just don’t know if I am supposed to use the total or the taxable to add to the gross to make the comparison. I am thinking I should tell them not to give it to me until next year.

Thanks for any help on this matter.

[M-MTax]

---

@XAM330 wrote:

I am thinking I should tell them not to give it to me until next year.

---

That might actually be a useless request and you should speak with the attorney with respect to the timing of the payment.

The reason being is some estates/trusts are required to distribute certain amounts to beneficiaries and, if that's the case here, you will receive a K-1 with a figure reportable on your 2025 return whether the $33,000 is distributed to you in 2025 or not.

Ref: Section 662 - https://www.law.cornell.edu/uscode/text/26/662

In short, if the estate is required to distribute the $33,000 currently, you'll need to report it on your 2025 return even if you delay payment until 2026.