Grandpa (in his 80s) dies and leaves a fixed annuity to a minor (16) and does not designate a custodian. Since it is more than $10K the California probate code states that the minor cannot receive the funds directly without a custodian. The parents of the minor do not want to bother to go to court to get ‘guardianship of estate’ to manage the minors funds due to costs and time.

The annuity company will allow the minor to simply wait until age of majority, 18, to make a claim on the annuity but I have heard that if the minor does not make a claim within 1 year after the death that they may have to pay the income tax on the full amount as if it was taken as a full surrender.

Is this true? Thanks