DEAR HARRY: My mother passed away in April. She had an annuity from one of our major life-insurance companies. My brother and I were listed as equal beneficiaries on the annuity. At the time of the distribution, an agent of the company told us that there is no Pennsylvania inheritance tax on the money we were to receive. Our lawyer/accountant had the appropriate Pennsylvania tax forms prepared showing a zero value for the annuity. Now, both the agent and the lawyer are telling us just the opposite - that the annuity is taxable at the rate of 4 1/2 percent.

WHAT HARRY SAYS: Annuities were originally written to make payments that lasted a lifetime, no more. At times, the companies issued annuities on a survivorship basis in which the annuity lasted for the longer of two lives. The companies realized that people hesitated to buy annuities just in case the annuitant(s) lived a very short time after the policy was issued, so they put in "guaranteed payment" plans. These guaranteed a certain minimum number of payments, such as five or 10. At the time of your mother's death, neither of your pros was aware that there were unpaid amounts accruing to you and your brother. When they became aware, they advised you (properly) that the value of the remaining payments was subject to the tax.

Write Harry Gross at the Daily News, 801 Market St., Philadelphia, PA 19107.