Why can’t I change the beneficiary on my annuity if I “owe” on my annuity for future payments I recently sold?

I would like to designate my Trust as beneficiary but was told I have to leave it as “the estate of…”

Asked on November 8, 2011 under Estate Planning, Arizona


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Even though you may owe premiums on your annuity that you sold and you have been told not to designate your trust as the beneficiary of the annuity, the reason for the advice is that insurance policies are not a taxable matter if the beneficiary is not the Estate or trust of the person who it was designated.

Meaning, if the insurance policy that you are writing about names your estate or trust as the beneficiary, the amount of the policy will be included in the Estate or trust for estate tax purposes. However, if a third person is the beneficiary, the amount of the policy is not included in the deceased person's estate for tax purposes. The significance could be a lot of additional money being paid for state and federal taxes.

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