529 Plan and College Savings

Question: Do we have to pay taxes from an anuity left to us from wifes gma it got sold upon her deth and we got the cash

We sold the annuity upon her death and received the cash. we used that to start a 529 Plan in illinois. We also live in illinois.
Ok several conflicting answers, yes federal taxes cause inheritance, and then no, no tax cause inheritance, but maybe state tax?
when the annuity was sold there was a gain in it. so let me repeat situation. Gma died, she had an annuity in my wifes name. The annuity was Sold (With a Gain on the annuity) and we received a check for the amount. her estate was NOT over 1 mill. So real question is, are we going to have to pay taxes on the WHOLE annuity amount, OR only the GAIN of the Annuity, OR NO Taxes at all because it is an inheritance. or because its an annuity, inheritance doesnt play a role and have to pay tax anyways?

Answer: u are allowed a one timne gift of 10,000 dollars and u will need to pay taxes on any interest u make in the plan u chose, but not until u withdraw it

Financial Services Temecula CA: Life Insurance, Investments, Mutual Funds, 401k, IRA, Annuity

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