Legal Question in Wills and Trusts in New York

Re: Annuity Distribution

Assuming that their divorce documents did not change the beneficiary which might not have been recorded with the issuer, and that your father did not remarry, it appears your mother is entitled to the benefits. Since most annuities are tax deferred, as to earnings while the original funds were invested, and/or were not established as part of an employment benefit program, some part or all may be subject to income tax upon distribution. When your mother makes the application to the issuer, they will advise her what portion is subject to income taxes and what portion, if any, is tax free. They will also allow her to select alternatives methods of taking distributions, which may allow for some tax relief (spreading the taxes out over a few years). Finally, the size of your father's estate will also determine if any part of the estate, including the annuity, might also be subject to federal estate taxes. If his entire estate is valued over $675,000, some portion may be subject to estate taxes and even state inheritance taxes, since your mother is no longer a surviving spouse. Both issues, income and possible estate taxes, should be considered.

Re: Annuity Distribution

If your father remarried and was survived by a wife, then an annuity covered by ERISA (generally an emplyee plan) is given to the surviving spouse.

If there was no new wife and your mother is named as the beneficiary, then she can obtain the annuity payments. Generally the payments are subject to income tax. The value of the annuity may be subject to estate tax if your father's estate was over $675,000.

An annuity is not supposed to be covered by the will and I don't think that you are doing anything wrong.