If i have an Annuity and i die will there be any income taxes due by the beneficiary i choose?

Wow Im a little worried about some of the advice you received. An annuity is a policy with an insurance company that allows you to protect your money from probate, and yes it pes directly to your beneficiary within 7 days after the insurance co is notified. Unfortunately too many people give their opinions about annuities when they have no idea what they are and why they are great retirement/estate planning tools. Not to mention that Annuities pay higher interest rates than bank CD's and money markets, and Fixed annuities don't lose your money like the stock market and mutual funds. Good for you for having an annuity, now that I have shed some light on what they are. The answer to your question is YES. Just like any investment, you will not avoid paying taxes on your annuity. If it is Non Qualified Money, the taxable portion will be on the interest you have earned during the course of having the annuity policy. If it Qualified money like an IRA the entire amount will be taxable. The insurance company will be happy to take the approximate taxes right off the payout amount to help your beneficiary, or they can elect to pay it at the end of the year. Estate and inheritance tax only effect a small percentage of Americans, so this probably won't be an issue for you. Keep in mind that if this is infact in a Fixed Annuity and Not a Variable annuity, your interest has been compounding over the years tax deferred. That gain is significantly better than you would have gotten in a CD, paying taxes on it every year. Good for you. Make sure you keep that money in an annuity, and that you are getting a FIXed interest rate, no in the stock market. SAFETY