Inherited annuity

[Allen Trent]

Great advise again. That is what I was thinking of doing but not really sure if I should.

The carrier allows 1 withdrawal a year. So I was thinking of taking a small amount and claim the step up in basis. Then see if I get audited and it gets reversed. I wonder if things like this get flagged right away or could take a few years.

Taking out the lump sum would be a huge tax bill if I am wrong and missed out on spreading out the tax liability. The options were lump sum, retirement annuity or put the account in my name.

I am guessing when you say the carrier allows 1 withdrawal per year, it is under the 5 year deferral claim option that means you have to empty the death claim account by the end of the 5th year and you can take 0 or any amount in each of those 5 years. the 5 year deferral is an IRS allowed deferral for NQ annuity, just like all retirement accounts will now have a 10 year deferral under the Secure Act regulations.

I doubt you can "put the account in your own name" as a claim option. only a spouse can do a spousal assumption of a current contract on a NQ annuity as far as I know. my guess is the carrier is saying you can do the lump sum & turn around & open a new account with them.

Dig deeper on what they are saying is a "retirement annuity". if they are saying this to mean that you will be taking RMD based on your younger age, this could be a great option as it could allow you to spread out receipt for decades & possibly until your mid 80s. this option is gone going forward for inherited IRAs as part of the Secure Act & few, if any carriers, even allowed it before on the NQ annuities.

 

[CALTCAgent]

I am guessing when you say the carrier allows 1 withdrawal per year, it is under the 5 year deferral claim option that means you have to empty the death claim account by the end of the 5th year and you can take 0 or any amount in each of those 5 years. the 5 year deferral is an IRS allowed deferral for NQ annuity, just like all retirement accounts will now have a 10 year deferral under the Secure Act regulations.

I doubt you can "put the account in your own name" as a claim option. only a spouse can do a spousal assumption of a current contract on a NQ annuity as far as I know. my guess is the carrier is saying you can do the lump sum & turn around & open a new account with them.

This is what the contract says under distribution of the participant's account. So I wonder if taxes are owed if transferring to beneficiary name.

 

[LostDollar]

Are the rules for the annuities that are under discussion different than the rules for inherited ira's?

 

[Tahoe Ray]

Are the rules for the annuities that are under discussion different than the rules for inherited ira's?

An annuity can be classified as an IRA, but not all IRAs are annuities.

 

[LostDollar]

I am involved in a wrangle (or wrangles) in another sub-forum. I have no wish to have that happen here.

I had a reason for asking, if this is an inappropriate post, please let me know and I will delete it.

I inherited a small portion of a 403(b). I was allowed to assume ownership of my share of the decedent's plan. The plan included an annuity of some kind-for that I had an irrevocable one-time option of either moving the money to other funds the decedent held in the plan or leaving it in the annuity. (There would have been no income tax effects of that internal transfer.) Against the advice of 3 different parties, I left the money with the custodian and the annuity amounts in the annuity. The custodian is distributing the funds (both annuity and non-annuity) to me, based on the boxes I checked in their paperwork, according to the stretch IRA rules in effect in 2019.

So I can say, based on my experience, that with at least one funds custodian, a non-spouse can assume ownership of an IRA-4xx employer type plan. I only get a minimal "stretch" because of my age, but the ownership transfer worked, and is working, fine.

So from that perspective, my comment would be that caltc needs to see the equivalent of my "acceptance packet" from the annuity's carrier so he can see his specific options to accept the money and the income tax ramifications of the different choices. For me at least, almost everything was spelled out nicely once I had that package from the retirement fund custodian. But I don't know if those same kinds of rules apply to the annuity being discussed.

 

[Tahoe Ray]

So I can say, based on my experience, that with at least one funds custodian, a non-spouse can assume ownership of an IRA-4xx employer type plan. I only get a minimal "stretch" because of my age, but the ownership transfer worked, and is working, fine.

That's not considered assuming "ownership". If you were to become the "owner", you would not have had to stretch and could have treated the 403b (IRA, whatever) as your own and would follow those rules accordingly.

How is your account titled?

FWIW, it doesn't matter if there is an annuity or not in the qualified account, as account classification rules will supersede anything annuity related.

Also, you can't always trust a custodian. The IRS is the only entity's opinion that matters.

 

[LostDollar]

How is your account titled?

xyz University
xyx University Basic Retirement Plan

 

[LostDollar]

That's not considered assuming "ownership". If you were to become the "owner", you would not have had to stretch and could have treated the 403b (IRA, whatever) as your own and would follow those rules accordingly.

Ok, the fine print in the box for assuming ownership of the plan said that beneficiaries choosing that option had to distribute over the life expectancy of the oldest beneficiary (me). So I GOT to "stretch". In order to assume ownership of decedent's plan, I HAD to "stretch" according to terms that would have been disadvantageous taxwise to any of the other beneficiaries of the estate.

 

[Tahoe Ray]

xyz University
xyx University Basic Retirement Plan

I meant your name (you can use Lost Dollar). How is the account titled?

Ok, the fine print in the box for assuming ownership of the plan said that beneficiaries choosing that option had to distribute over the life expectancy of the oldest beneficiary (me). So I GOT to "stretch". In order to assume ownership of decedent's plan, I HAD to "stretch" according to terms that would have been disadvantageous taxwise to any of the other beneficiaries of the estate.

And NOT stretching would have been even better from a tax perspective (speaking in a vacuum). Which only a spouse can do.

 

[LostDollar]

I meant your name (you can use Lost Dollar). How is the account titled?
.

This is from a different place than what I gave you above.

A secretarial class business letter format to start with:

Custodian mailing information upper left corner

My mailing information immediately below

And then centered horizontally about a third of the way down the page:

A Confirmation statement
For A Plan Servicing Credit

A gray box contains four lines:
------------------------------------------
1) Plan Information
2)
3) Plan Name: XYZ UNIVERSITY BASIC RETIREMENT PLAN
4) Plan Number: .............
---------------------------------------------------

So as far as they are concerned, they have given me ownership of my share (documented by a will and other communication with the estate's attorney and executor) of the plan.

(As a side note, the plan servicing credit includes no adjustment of the annuity portion of the plan.)