Author: Tony Novak

Article:
Millions of investors own retirement annuity accounts but few
are aware of the tax implications when the annuity is passed to
an heir or beneficiary. A little known tax fact is that income
tax on an individually owned annuity can be postponed only if
the account owner's spouse is named as the sole beneficiary. If
the annuitant is not married, the same treatment may be obtained
through the use of a trust account. Any other designation of the
account beneficiary will cause the proceeds to be immediately
taxable in the year of the account owner's death. The results
can be financially devastating, triggering huge current tax
liabilities that would have otherwise been avoided. Most
beneficiary designations are made at the time that the annuity
account is opened, often without the advise of a professional
tax adviser. The investment representatives who typically open
these annuity accounts give the blanket recommendation to
investors to "seek advise from your own tax adviser" but few
investors ever bother to seek separate tax advice. Investors
often assume that the financial planner opening the annuity
account is incorporating tax advice into the service provided,
but usually this is not the case. By the time the tax problem is
discovered by the executor or the estate, it is too late to make
any correction.

About the author:
Tony Novak is an independent writer and financial adviser in
Narberth PA who provides OnlineAdviser services through
MedSave.com and FreedomBenefits.org

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