Getting ahead of future inherited annuity tax consequences
My mom-in-law (MIL), 81 is in poor health & will probably pass in 1-5 years. I am 55, husband, 56 w/ 2 dependents. My husband and I retired w/ the assistance of Rule of 55 on 4/1/25 & receive ACA credits toward family health insur premiums. My husband will inherit 2 tax deferred non-retirement GIAs, plus other bank funds (Ckg, Sav, CDs, life insur). Based on some found notes, annuity #1 initial amount was $50,060 in 1991 now worth $99,000 and consolidated annuity #2 initial amount $310,500 or more in 2005 now worth $837,000, both w/ no surrender charges. When my MIL passes, the inherited funds will cause a huge income spike and tax burden since we will not receive a step up in cost basis. Plus, we will need to pay back thousands of dollars of ACA credits. My MIL rents and does not have brokerage accounts. Is there any investment vehicle you can suggest to surrender the annuities and reduce our future tax consequence? Or, what professional should we consult with? A CFP, an estate attorney or someone else to help plan for this future consequence? We’ve been burned by financial advisors in the past and do not know who to trust.
Thank you, thank you for everything you do and give to the world. I’ve made so my mistakes with my money over the years but keep moving forward correcting course with your guidance.
Terry Says
Wait. First what makes you so sure you will not get a “step-up” in basis when you inherit these accounts. ALL inherited assets get a step up in basis these days. Are you named as beneficiaries? If they are not IRAs, there will be no tax consequences, and thus no increase in income! And thus, no need to repay ACA credits!!
So the first thing you need is some reliable information! You need a fee-only FIDUCIARY financial planner to look over this entire situation — and particularly before you liquidate any of these investments now!
This is too much for me to advise in a blog post. Instead, please read this:
https://www.terrysavage.com/pam-krueger-wealthramp/
Pam will match you with an advisor (or two, if you want to choose) who can help you through this process without making expensive mistakes. I urge you to start now.
