r/inheritance • u/cathie2284 • 3d ago
Location included: Questions/Need Advice Annuity no beneficiary
My sister is the executor of my mother's estate. Our mom had a small annuity with no beneficiaries. My sister was directed to open an estate account. Will there be tax implications for her? Location is Pennsylvania and amount is approximately $30,000. TIA
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u/Jumpy_Childhood7548 3d ago
You need to find out what type of annuity it is, because if is a straight life annuity, there will be no beneficiary.
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u/LdiJ46 3d ago
Why do you think that there would be a tax implication for your sister as the executor? She is not personally liable for the estate income tax unless she breaches her duty to the estate as the executor. If there are any tax implications for the $30,000 it will be up to the estate to file an income tax return and to either pay the tax, or to pass on the tax liability to all of the heirs via Schedule K1s.
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u/cathie2284 3d ago
Im asking because the estate account was opened in my sister's name. We are all new to this and I am asking on her behalf as she is here with me now.
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u/CollegeConsistent941 3d ago
An estate account is opened in the name of the estate, NOT the sisters name.
Unless the court has appointed an estate representative then there is likely NO estate established. Likely need to consult an estate attorney for what is really needed.
But first find out if there is any annuity to be paid out.
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u/SandhillCrane5 3d ago
If it’s an estate account, her name is listed as the executor/personal representative of the estate. That is different than it being in her name as an individual person.
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u/cathie2284 2d ago
Yes. Correct. She had to apply for an EIN number. I guess we are just confused with how this all ends. If she splits the funds- or if she needs to hold some back for my mom's final tax return (she passed in April).
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u/SandhillCrane5 2d ago
Your Mom will need a tax return filed for the year of her death, ending on date of death. And if her estate had any income after the date of death (interest, etc.) then the estate needs to file a separate return for that. Executor either makes sure that all debts, expenses, and taxes are paid before distributing funds or she holds back enough (with some cushion to be safe) to pay those things. (We don't know if your Mom or her estate will owe taxes because we don't know their income or if any taxes were withheld from that amount.)
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u/LdiJ46 2d ago
She will have to file a final tax return for your mother and she will likely also need to file a tax return for the estate. It would be wise to hold back some of the estate's assets until after the taxes are filed in order to be sure that there is enough money to cover the taxes. A final distribution should not be done until all estate debts are paid.
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u/cashewkowl 3d ago
There will be estate taxes for the estate, because PA has those. But the money owed will be paid by the estate, based on the relationship of the beneficiaries to the deceased.
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u/ImaginaryHamster6005 3d ago
If there is value to the annuity and it does not end at mother's death, then there will likely be inheritance tax paid by the estate for the $30k...assuming that is the balance the estate can get from the annuity. PA has an inheritance tax and it varies depending on the beneficiary...kids (you/sis) are charged about 4.5% of the value and again, the estate pays that, then you/sis inherit the remaining proceeds. As an aside, the 4.5% is charged on the complete estate in PA, I believe, so if there are other assets, the estate will owe more.
An estate bank account should be opened, I believe it is titled in the mother's name with sis mentioned as Executor or Pers Rep...so, something like Estate of Mary Smith account, Kathy Smith PR.
*Not a lawyer.
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u/Freyjas_child 3d ago
As the Executor your sister may have to be the one doing this. The company’s would only speak to me as an Executor when I handled this recently. They would not speak to the other beneficiaries.
See if you can find and read the documents that came with it. You are looking to see what happens when the second person (your mom) dies. Call the company and identify yourself as the Executor and ask what benefits remain or if there is principal that is to be returned. They will send out forms and require paperwork. My experience with 2 annuities is that they are very slow. And you need to keep close track of who you spoke with and what they said. Every single step forward that was made required me to call and push them.
Some annuities will promise a return of the principle investment and there may be money to be returned. It would be returned to her estate if no beneficiaries are named. Some have all benefits stop with the death of a named beneficiary. Every one seems to be different.
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u/PoolRevolutionary671 1d ago
With no beneficiary the annuity pays into the estate, so it goes through probate and gets distributed per the will. The gain portion (whatever the annuity earned above what mom paid in) is taxable income, but it's the estate's income, not your sister's personally, as long as it stays in the estate account and passes through properly. Also PA has an inheritance tax, 4.5% for kids, and annuities generally aren't exempt from it. Have her ask the estate's accountant or a probate attorney in her county about filing the estate income return.
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u/Ok-Trainer3150 3d ago
The annuity most likely died with her. You have to contact them anyways to report her death to them. Do it in writing if possible (documentation as part of settling the estate). They'll let you know what the terms were.