Does Beneficiary Pay Taxes On Annuities? 
Generally speaking , if the annuity is nonqualified , the beneficiary of an annuity will pay taxes on the earnings . The basis , or monetary contribution that purchased the annuity , is not taxed . How the beneficiary is taxed depends on whether they receive the annuity in a lump sum or whether they annuitize it -LRB- take periodic payments -RRB- . If the annuity was tax qualified when purchased , taxes are paid on both the basis -LRB- original contribution -RRB- and the earnings . 