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In general, it is the owner of the annuity who is taxed on any amounts disbursed from the annuity during the annuitant’s lifetime. This is true even if someone else is receiving annuity benefit payments: Naming another person as annuitant does not shift tax liability away from the owner. Only a gift or other transfer of ownership can do that. However, you should note that under some contracts, once the contract is annuitized, then the annuitant automatically becomes the owner.

Remember that, with certain exceptions, if the owner of the annuity is not a natural person, the annuity does not provide income tax-deferral on accumulations. The major exceptions to the non-natural person rule are a trust acting as agent for a natural person, a qualified plan, or the estate of a deceased owner.



Last Updated: 9/23/2012 10:05:00 PM