Small Annuity question

[imoldernu]

Easy question from this financial-wisdom impaired senile simpleton...

DW's mom left her an $8000 annuity back in 1980. Over the years, it has grown to $61K annuity value, and a $52K surrender value. Minimum interest rate 4%.

Here's where we stand:
Currently pay no Federal or State taxes
Don't need the money now
Was told that to take it out as an annuity, it had to be over a minimum 10 yr. period... small amounts, not needed
We/she probably won't live that long

Current thinking is to let it lie there and use other assets first, and save this for any estate or an emergency.

I don't think we could take the surrender value out in increments ie. $10 or $15K/yr. , but would need to take it all at once, according to the financial institution that holds the $$$.

Any thoughts?

 

[Independent]

I found a number of online sites that say the gain in the contract is taxable income
- to you, if you surrender now, and
- to you heirs if you keep it until you die.

So, there could be a very small factor here if you are in a zero bracket and your heirs aren't.

OTOH, the inside build up isn't taxed annually if you keep the money in the annuity.

 

[SevenUp]

Probably best to read the actual contract rather than rely on some customer rep regarding your withdrawal options. Annuities come in so many different flavors that speculation would likely be incorrect.

Confirming what Independent said, withdrawal of any interest will be taxed at ordinary income rates, whatever that would be for you or your heirs.

 

[Sunset]

I found a number of online sites that say the gain in the contract is taxable income
- to you, if you surrender now, and
- to you heirs if you keep it until you die.

So, there could be a very small factor here if you are in a zero bracket and your heirs aren't.

OTOH, the inside build up isn't taxed annually if you keep the money in the annuity.

When you say heirs, really you mean the estate will pay the taxes on the annuity proceeds and distribute the remaining cash to the heirs ?

 

[Koolau]

Not sure how to advise on this issue. What does seem clear is that 4% guaranteed on the current balance is pretty good for money as safe as that in most insurance contracts. You might research the company and be sure it's not only rated well, but doing well in its niche(s). If it seem stable, there seems little down side in letting it ride - assuming you don't need the money. YMMV

 

[Independent]

When you say heirs, really you mean the estate will pay the taxes on the annuity proceeds and distribute the remaining cash to the heirs ?

I was actually assuming the annuity would have a named beneficiary. But, the poster mentioned "estate".