I am retired, 63 yrs. old. My father passed away recently and left some
life insurance and a non-qualified annuity to split with my two sibs. I
am drawing early SSA payments. I would like to know if the Ins. and/or
Annuity receipts will affect my SS check monthly. And the annuity
includes some taxable gain, but other than that will I owe any fed.
income taxes on any of it other than the gain amount?

Thank you,
R

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R:

First, my condolences on your father’s passing. Next, I want to refer you to the Social Security Administration’s excellent web site, ssa.gov. You’ll be able to look up the answers to this question and others you may have. Also, you can call your local office, where they are quite ready to help you as well.

When it comes to Social Security, you have two worries. The first is if you have earned income. If it is above a certain limit then your Social Security retirement benefits will be reduced if you are under your regular retirement age. Proceeds from a life insurance or annuity policy are not considered earned income so you will not have to worry there.

However, what might happen is that your modified adjusted gross income will likely go up because of the extra funds you have now. Depending on your marital status and income level, 0%, 50% or 85% of your Social Security benefits may be taxable.

As for federal income taxes on the life insurance and annuity, if I understand your situation correctly, then you are right in that only the gains on the annuity will be taxable.

With the changes in your circumstances, it might be a good year to seek out a tax professional to do a once-over on your situation and see if there are any other complications that I may not be aware of.

Gary Silverman, MBA,CFP®

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