It's complicated and you really need to ask the payor.
To over-simplify, any money that would have been taxable to the account owner is taxable to the beneficiary. For example, with a pre-tax IRA, the contributions were never taxed, so all the distributions are taxed to whoever withdraws them. On the other hand, if the annuity was bought with after-tax dollars, then part of the distribution is a return of those after-tax dollars and is (usually) not taxed again, while the part of the annuity that represents tax-deferred growth will be taxed.
But only the payor knows.
