Money received as a beneficiary

Forum|Forum|4 years ago
August 12, 2022
2 replies
23 views

My brother passed away this year. He had an annuity (not an IRA) with several beneficiaries including me. Is the money which came directly from the insurance company taxable to me as income on my 2022 taxes? If yes, do I need to pay an estimated Fed tax now?

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NCperson

Level 15

@olivia2fc some might be taxable but you'll have to ask the insurance company; if part is taxable, you will receive a 1099-R in January.

Opus 17

Level 15

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.