This type of annuity is usually used by people who need larger monthly incomes and do not have dependents or intend to provide financial resources for their dependents in some other way. For example, if an annuitant buys a 15 year certain annuity and dies after eight years, his or her beneficiary will receive monthly payments for the remaining seven years of the contract. An installment-refund annuity pays the remainder of the original investment to the beneficiary in monthly installments if the annuitant dies but provides lifetime income to the annuitant. The amount of the monthly check is based on the ages of the annuitant and his or her survivor. The major advantage of a tax deferred annuity is that, during the accumulation phase, neither contributions nor interest earned are taxed.
Contributions funnel directly from em ployers to an annuity account on a before-tax basis.
This effectively lowers gross income and reduces current state and federal income tax liabilities similar to ordinary Individual Retirement Accounts. An annuity will be included in a decedent's estate for Montana inheritance tax purposes and Federal estate tax purposes unless it is the type of annuity that stops paying upon the death of the original annuitant. By administrative regulation, this exclusion extends to annuities. Therefore, annuities may be a useful tool to minimize payment of inheritance tax for certain individuals. An annuity with a named beneficiary is not subject to probate.