624 / In the case of a joint and survivor annuity, what value is includable in the gross estate of the annuitant who dies first?

Thus, if a deceased annuitant purchased the contract, the full value of the survivor’s annuity is includable in his or her gross estate. If the survivor purchased the contract, no part of the value is includable in the deceased annuitant’s estate. If both contributed to the purchase price, only a proportionate part of the value is includable in the deceased’s estate.

For example, suppose that the decedent and his wife each contributed $15,000 to the purchase price of a joint and survivor annuity payable for their joint lives and the life of the survivor. If the value of the survivor’s annuity is $20,000 at the decedent’s death, the amount to be included in his gross estate is one-half of $20,000 ($10,000) since he contributed one-half of the cost of the contract.²

In accord with this rule, if a joint and survivor annuity is purchased with community funds, only one-half of the value of the survivor’s annuity is includable in the gross estate of the spouse who dies first.³ (For estate tax value of survivor’s annuity, see Q 625.)

Where a joint and survivor annuity between spouses is treated as qualifying terminable interest property for gift tax purposes ( Q 619) and the donee spouse dies before the donor spouse, nothing is included in the donee spouse’s estate by reason of the qualifying interest.⁴ Where the survivor is the deceased annuitant’s spouse, the value of the survivor’s annuity will qualify for the marital deduction if the contract satisfies applicable conditions ( Q 191).

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Planning Point: An immediate joint and survivor annuity with no refund feature or a deferred annuity annuitized on that basis between spouses usually will escape estate tax in each spouse’s estates because of the marital deduction and because the annuity ends at the survivor’s death.

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