Will the beneficiary be taxed on the interest that has accumulated inside the annuity?

Yes, beneficiaries will be taxed on the tax-deferred interest when they receive those dollars. However, if a beneficiary is the spouse of the owner and the owner dies, he/she may elect to continue the annuity and postpone taxes. Once again, the customer decides when to pay income taxes. If the beneficiary is not the spouse and the owner dies, then dollars must be totally withdrawn within five years or they may be withdrawn over the beneficiary's life expectancy. However, this latter option must be elected during the first 12 months following the owner's death.

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