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Mike9241 · ‎July 7, 2022

if the annuity had a secondary beneficiary ( basically the one that would be entitled to the annuity if the principal owner died, then the annuity is theirs as are the tax consequences for cashing it in. if the annuity passed to the estate then and the deceased had a will or the annuity went to a trust then you need to read the will or trust agreement to see if the income can be distributed to the beneficiaries. if there was no beneficiary and the annuity was not covered by the will or didn't go to a trust then the deceased state's laws of intestate succession apply. most contain a provision that would allow discretionary distribution of the proceeds. the tax laws also dictate that the distribution must be done n a timely manner.

this is from IRC sec 663 - in other words to get a deduction the proceeds must be distributed during the tax year or within 65 days after the tax year.

(b)Distributions in first sixty-five days of taxable year
(1)General rule
If within the first 65 days of any taxable year of an estate or a trust, an amount is properly paid or credited, such amount shall be considered paid or credited on the last day of the preceding taxable year.

(2)Limitation
Paragraph (1) shall apply with respect to any taxable year of an estate or a trust only if the executor of such estate or the fiduciary of such trust (as the case may be) elects, in such manner and at such time as the Secretary prescribes by regulations, to have paragraph (1) apply for such taxable year.