death benefit provision of a variable annuity
Death Benefit. An annuityâs death benefit is a lump sum paid out at the ownerâs death. The taxable portion is the amount that exceeds the contractâs cost basis. The death benefit from a qualified annuity to a nonspouse beneficiary can be rolled into an âinherited IRA,â which is a special type of IRA only for qualified inheritances. By rolling over the death benefit, the beneficiary can stretch out the payments -- and the tax due on the payments -- over five years or longer.