[leonardo23]

Is the gain on a variable annuity, on which the beneficiary is a Charity, taxed; and, if so, does the charity pay that tax or is it paid from whatever remains of the owner's assets. If it is the latter, is there any simple way to avoid this problem?
leonardo23

[ebaines]

Taxes on the gain of an annuity are deferred until such time as you take withdrawals. When you die the beneficiary inherits the annuity and must pay ordinary income tax on the amount of the gain. But since a charity is tax-exempt, it does not pay any tax on the gain.

Side note - variable annuities in general are NOT good investments, especially for estate planning purposes. Their only advantage is tax deferral, but in exchange: (a) you have to pay taxes at ordinary income rates, not capital gains rates, (b) if the annuity has a loss you can't take the loss on your taxes, (c) there is no step-up in cost basis for the heirs, and (d) most variable annuities have very high fees.

[leonardo23]

Many thanks for your prompt response and for the information. It is much appreciated.

While I agree with your side note, it is too soon old and too late smart for me.

leonardo23

[leonardo23]

[QUOTE=leonardo23;3047894]Many thanks for your prompt response and for the information. It is much appreciated.

While I agree with your side note, it is the old German quote, I believe, "too soon old and too late smart for me"

leonardo23