630 / If a decedent has been receiving payments under a private annuity, what is includable in the decedent’s estate?

If the transaction resulted in a gift from the annuitant to the obligor ( Q 586), the annuitant’s death within three years of the transaction may result in the value of the gift, plus gift tax paid, being included in the deceased annuitant’s gross estate ( Q 827). If an annuitant’s death does not occur within three years, but the gift was a taxable gift, the gift will be an adjusted taxable gift for purposes of the estate tax computation in the annuitant’s estate.

In the usual private annuity transaction, an annuitant’s transfer of property given in exchange for the annuity is complete and absolute. Under such circumstances, no part of the transferred property is includable in the annuitant’s estate. If, however, the annuitant retains at death an interest in the property transferred, the value of the property could be includable in the annuitant’s gross estate under IRC Sections 2033, 2036, 2037 or 2038 as may be appropriate under the circumstances.