Receiving proceeds from an annuity or life insurance policy
We can help guide you
The basics
An annuity is a long-term, tax-deferred contract issued by a life insurance company. It is designed to turn the investment made into the contract into regular payments that can last a lifetime. This is called annuitization.
When someone purchases an annuity, they may have the option to name one or more beneficiaries. And those beneficiaries are then eligible to receive payments when the original annuitant passes away.
Annuities are categorized as either qualified or nonqualified. This means they differ in how they are taxed and transferred to a beneficiary. Your financial services professional can tell you more about your specific annuity.
Payment options
Every situation is different, but two common ways that people receive annuity money are in a lump sum payment or in incremental amounts during the first 5 years after the contract owner's death.
Another payment option is to reinvest in an inherited annuity. For this type of payout, you can either:
1. Annuitize the proceeds of the annuity to create a stream of income for a set period or for your lifetime.
- OR -
2. Use the proceeds to purchase a new deferred contract with either a 5- or 10-year payout option or for your lifetime.
These aren’t all of the available payment options. A financial services professional will be able to provide a more comprehensive list and can help you determine which option might be right for you.
Investment options
We offer a variety of options to suit your needs. It’s important to think about what your goals are and what you want to achieve.
• Do you want to accumulate assets?
• Do you want to preserve wealth?
• Do you want to have guaranteed income?
One of our experienced financial services professionals can help you understand all your options based on your financial needs and goals.
Call us at 1-844-457-7982 or schedule a time to talk.
Taxes
Inherited annuities are taxable as ordinary income in the year that you receive the payment(s). So, the amount and timing of the taxes you’ll owe depends on the type of payment you choose.
For example, if you choose to take a lump sum payout, where you get the money all at once, you’ll typically have the largest tax liability.
On the other hand, reinvesting in an inherited annuity can help minimize the tax liability by spreading it out over time.
The basics
A death benefit is the money a beneficiary receives from a life insurance policy upon the death of the policyowner. This money is usually income tax-free.
Life insurance policies help provide security to the beneficiary and can help secure your family’s financial future by assisting with college expenses, paying off a mortgage, covering funeral expenses or estate taxes, and more.
Payment options
Every situation is different, but these are the most frequently used payment options:
- A lump sum payment
- Installment payments
- Place funds in an interest-earning account
- Invest in an annuity with one of the following
- Annuitize the proceeds of the life insurance policy to create a stream of income for a set period or for your lifetime.
- Use the proceeds to purchase a deferred contract with either a 5- or 10-year payout option or for your lifetime.
Contact your financial services professional for a complete list of payment options, and to discuss which option might be right for you.
Investment options
We offer a variety of options to help meet your needs. It’s important to think about what your goals are and what you want to achieve:
- Do you want to accumulate assets?
- Do you want to preserve wealth?
- Do you want to have guaranteed income?
One of our experienced financial services professionals can help you understand all your options based on your future financial plans.
Call us at 1-844-457-7982 or schedule a time to talk.
Taxes
Generally, the life insurance proceeds you receive as a beneficiary are not included in gross income and you don't have to report them. However, any interest you receive is taxable and you should report it as interest received.
Keep in mind that reinvesting in an annuity could help minimize the tax liability by spreading it out over time.