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The contract or agreement is not a

the duration of life, an annuity with

Annuities Under Approved

policy of insurance on the life of the

payments to continue after death to a

Plans

decedent.

designated beneficiary, if surviving the

The following rules relate to whether

decedent.

Note. A private annuity is an annuity

part or all of an otherwise includible

2. A contract under which the

issued from a party not engaged in the

annuity may be excluded. These rules

decedent immediately before death was

business of writing annuity contracts,

have been repealed and apply only if

receiving or was entitled to receive,

typically a junior generation family

the decedent either:

together with another person, an

member or a family trust.

•

On December 31, 1984, was both a

annuity payable to the decedent and

An annuity contract that provides

participant in the plan and in pay status

the other person for their joint lives,

periodic payments to a person for life

(for example, had received at least one

with payments to continue to the

and ceases at the person’s death is not

benefit payment on or before December

survivor following the death of either.

includible in the gross estate. Social

31, 1984) and had irrevocably elected

3. A contract or agreement entered

security benefits are not includible in

the form of the benefit before July 18,

into by the decedent and employer

the gross estate even if the surviving

1984, or

under which the decedent immediately

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spouse receives benefits.

Had separated from service before

before death and following retirement

January 1, 1985, and did not change

An annuity or other payment that is

was receiving, or was entitled to

the form of benefit before death.

not includible in the decedent’s or the

receive, an annuity payable to the

survivor’s gross estate as an annuity

The amount excluded cannot exceed

decedent for life. After the decedent’s

may still be includible under some other

$100,000 unless either of the following

death, if survived by a designated

applicable provision of the law. For

conditions is met:

beneficiary, the annuity was payable to

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example, see Powers of Appointment

On December 31, 1982, the

the beneficiary with payments either

and the Instructions for Schedule

decedent was both a participant in the

fixed by contract or subject to an option

G — Transfers During Decedent’s Life,

plan and in pay status (for example,

or election exercised or exercisable by

above. See also Regulations section

had received at least one benefit

the decedent. However, see Annuities

20.2039-1(e).

payment on or before December 31,

Under Approved Plans, below.

1982) and the decedent irrevocably

If the decedent retired before

4. A contract or agreement entered

elected the form of the benefit before

January 1, 1985, see Annuities Under

into by the decedent and the

January 1, 1983, or

Approved Plans, below, for rules that

decedent’s employer under which at the

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The decedent separated from service

allow the exclusion of part or all of

decedent’s death, before retirement, or

before January 1, 1983, and did not

certain annuities.

before the expiration of a stated period

change the form of benefit before

of time, an annuity was payable to a

Part Includible

death.

designated beneficiary, if surviving the

If the decedent contributed only part of

Approved Plans

decedent. However, see Annuities

the purchase price of the contract or

Under Approved Plans below.

Approved plans may be separated into

agreement, include in the gross estate

two categories:

5. A contract or agreement under

only that part of the value of the annuity

•

Pension, profit-sharing, stock bonus,

which the decedent immediately before

receivable by the surviving beneficiary

and other similar plans and

death was receiving, or was entitled to

that the decedent’s contribution to the

•

Individual retirement arrangements

receive, an annuity for a stated period

purchase price of the annuity or

(IRAs), and retirement bonds.

of time, with the annuity to continue to a

agreement bears to the total purchase

designated beneficiary, surviving the

Different exclusion rules apply to the

price.

decedent, upon the decedent’s death

two categories of plans.

For example, if the value of the

and before the expiration of that period

Pension, etc., plans. The following

survivor’s annuity was $20,000 and the

of time.

plans are approved plans for the

decedent had contributed three-fourths

6. An annuity contract or other

exclusion rules:

of the purchase price of the contract,

arrangement providing for a series of

the amount includible is $15,000 (

a. An employees’ trust (or under a

substantially equal periodic payments

$20,000).

contract purchased by an employees’

to be made to a beneficiary for life or

trust) forming part of a pension, stock

Except as provided under Annuities

over a period of at least 36 months

bonus, or profit-sharing plan that met all

Under Approved Plans, below,

after the date of the decedent’s death

the requirements of section 401(a),

contributions made by the decedent’s

under an individual retirement account,

either at the time of the decedent’s

employer to the purchase price of the

annuity, or bond as described in section

separation from employment (whether

contract or agreement are considered

2039(e) (before its repeal by P.L.

by death or otherwise) or at the time of

made by the decedent if they were

98-369).

the termination of the plan (if earlier);

made by the employer because of the

decedent’s employment. For more

b. A retirement annuity contract

Payable to the decedent. An annuity

information, see section 2039.

purchased by the employer (but not by

or other payment was payable to the

an employees’ trust) under a plan that,

Definitions

decedent if, at the time of death, the

at the time of the decedent’s separation

decedent was in fact receiving an

Annuity. The term “annuity” includes

from employment (by death or

annuity or other payment, with or

otherwise), or at the time of the

one or more payments extending over

without an enforceable right to have the

termination of the plan (if earlier), was a

any period of time. The payments may

payments continued.

be equal or unequal, conditional or

plan described in section 403(a);

unconditional, periodic or sporadic.

c. A retirement annuity contract

Right to receive an annuity. The

Examples. The following are

purchased for an employee by an

decedent had the right to receive an

examples of contracts (but not

employer that is an organization

annuity or other payment if,

referred to in section 170(b)(1)(A)(ii) or

necessarily the only forms of contracts)

immediately before death, the decedent

(vi), or that is a religious organization

for annuities that must be included in

had an enforceable right to receive

the gross estate:

(other than a trust), and that is exempt

payments at some time in the future,

from tax under section 501(a);

whether or not at the time of death the

1. A contract under which the

decedent immediately before death was

decedent had a present right to receive

d. Chapter 73 of Title 10 of the

receiving or was entitled to receive, for

payments.

United States Code; or

-23-

Part Instructions

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2011 Page 23

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