[grandchild]

My deceased grandmother left me an annuity. How exactly does this work? Is this something she had already bought or will the trustee have to take money from the estate to put into it? Will it be paid in installments or can I get it in one lump sum? How soon will I benefit from this. Thanks

[Wondergirl]

Talk with a lawyer or someone you trust who knows the details of this gift.

I found this on Internet. It may or may not be similar to your question and your inherited annuity:

Q: I want to know upon inheriting an annuity from my parent, do I owe taxes on the year it's inherited (on its growth) or only if I decide to cash it in? I'm assuming I can continue with the annuity in my name and not take any cash settlement.I want to know how this works.

A: Once it is distributed, either a lump sum distribution or a new annuity with you as the owner, ordinary income tax will become due on the "growth" of the annuity. The growth is the current value of the annuity less the amount paid in by the owner. Most all annuities, like traditional IRAs, are tax deferred. When they are inherited, you inherit all the tax liability that was deferred over the years by the owner of the annuity. Often, you can spread out the tax liability by annuitizing the annuity. Make sure the insurance company provides you a complete listing of all your distribution options with the tax implications of each one.