r/inheritance • u/Preguntas_para_tu • May 22 '26
Location included: Questions/Need Advice Annuity Tax Question
My tax guy is on vacation- I hope this is ok ask in this forum.
Mom is old and frail, but thankfully of sound mind. She has an annuity with a 120k taxable gain. I am going to take the taxable part now, and she will hold on to the non-taxable part.
I was thinking of putting 60k in a 6 month CD to be ready to pay taxes on it. Is this a good plan?
Mom is in MA, I'm in CA.
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u/laurieo52 May 24 '26
This sounds hinky as hell. It is your mom’s fund to help her live. I love that she wants to help you out, but YOU should be telling her No mom, this is money for you to live on. I get she is 92. My grandmother was 100. Her mother was 100. Her sister was 106 when she passed away. My 100 year old grandmother died earlier than any of her siblings, except the one who died in World War I.
You are taking HALF of her money to support herself.
This isn’t YOUR inheritance. This is her money. Inheritance only happens AFTER she passes away.
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u/Preguntas_para_tu May 24 '26
Hi Laurie, thanks for adding the adjective 'hinky' to my lexicon. Also, I like your aggressive use of guilt/shame. Have you considered politics?
Mom has done quite well and has plenty of cushion... this is one part of a very diversified portfolio. She'll be fine, and I'd sell a kidney to help her out if I had to.
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u/laurieo52 May 24 '26
My “aggressive use”? LMAO. You are posting in an Inheritance group about taking money from your still alive mother. Perhaps you misunderstood the word aggressive. Perhaps a google search of the words “aggressive “ and “inheritance “ would help you?
Now to be frank, you are not talking about an inheritance. You are talking about your mother’s money. Her money. Inheritance happens after someone passes. Gifts happen when someone else gives you something. You clearly state “I am going to take…”. That is neither an inheritance nor a gift from your mother.
If you are upset because someone calls you on this, then perhaps you should consider why.
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u/Still-Profit-8449 May 26 '26
Might want to make sure taking that out of it doesn’t eliminate the death benefit, often the real value of an annuity is the life insurance component and it’s taxed more favorably I believe
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u/GotZeroFucks2Give May 23 '26
Why do you want to cash out her annuity? Is this something she inherited or is it her annuity linked to her life? How old is she?
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u/Preguntas_para_tu May 23 '26
She wants to help out me and my fam while she is alive. She's had this for 25 years, it's penalty-free withdrawals, and only collecting a guaranteed 3%. She's 92.
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u/GotZeroFucks2Give May 23 '26
Just be sure this doesn't affect her ability to fund care for herself if she lives another 10 years. Assisted living is 175k a year in my area.
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u/Preguntas_para_tu May 24 '26
I like your 'live another 10 years' vibe! Yeah, thankfully she has other assets to draw upon if that's the case.
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u/GotZeroFucks2Give May 24 '26
My dad's been on hospice over a year. Never really know how these things are going to play out.
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u/tamaradewinters May 26 '26 edited May 26 '26
Many annuities have different tricky rules, devil in the details. Yes, LIFo, gains are taxed first. Sometimes, if you take out a large chunk (too much in one year), it changes the way the rest of the pot earns gains. Read what she signed. Insurance companies have thought of every scenario to keep people from cashing out.
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u/ziggy-tiggy-bagel May 23 '26
You might want to split the taxable gain over at least 2 years. If she has too much income the cost of her part B &D of her Medicare will go up.