How Are Variable Annuities Taxed At Death?

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   David RacichPRO

   Fountain Hills, Arizona

   Variable annuities are personal property. Personal property has an owner. An owner can pass property at death in differing ways. There may be state specific issues, so generalizations are used. Strictly by the question posed: Assuming that this is a non-qualified annuity with no generational “stretch” planning tactics, the variable annuity will, in most states, bypass probate and pass directly to the primary beneficiary of the policy. If that’s a spouse, more than likely, no taxable event will occur (assuming there’s a gain), but someone else, including children, will more than likely pay ordinary income tax on any gain.
    

   Answered on June 11, 2013

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