Truth 25. Inheriting an annuity
"A very rich person should leave his kids enough to do anything, but not enough to do nothing."
Although people buy annuities to provide a safe and secure income stream in retirement, many people end up dying without ever drinking from that stream. Some people are just frugal and find that they do not need the money contained in their annuity. They leave it untapped within the annuity to continue to grow on a tax-deferred basis for their children. Others find themselves looking at their annuities as half-empty glasses and obsess about the large income tax hit they will take when they withdraw money from the annuity and confront their day of reckoning with the IRS.
If the owner of an annuity dies ...