Inherited IRA question

[MAnnuity]

20 year old inherits an IRA annuity from her (50 yo) parent who passed away.

The goal is to have these funds remain tax deferred as long as possible (taking whatever distributions are needed or liquidating over 10 years).

Annuity claim paperwork indicates options:

Lump sum
Annuitization options
Transfer to inherited IRA annuity with same carrier
Transfer to inherited IRA annuity with a different carrier

Is there a way to accomplish what they are trying to do, or is their best bet going to be a low cost Fidelity annuity or similar?

I called the carrier for general info and rep was not helpful, claims doesn't take phone calls, and no Advanced Markets.

 

[adjusterjack]

You'll have to consult a tax pro about inherited IRAs. It's what the IRS requires that counts. And it's not simple.

 

[LostDollar]

20 year old inherits an IRA annuity from her (50 yo) parent who passed away.

The goal is to have these funds remain tax deferred as long as possible (taking whatever distributions are needed or liquidating over 10 years).

Caveat, not an agent.

Does your client understand the income tax implications of this approach?

 

[Tahoe Ray]

20 year old inherits an IRA annuity from her (50 yo) parent who passed away.

The goal is to have these funds remain tax deferred as long as possible (taking whatever distributions are needed or liquidating over 10 years).

Annuity claim paperwork indicates options:

Lump sum
Annuitization options
Transfer to inherited IRA annuity with same carrier
Transfer to inherited IRA annuity with a different carrier

Is there a way to accomplish what they are trying to do, or is their best bet going to be a low cost Fidelity annuity or similar?

I called the carrier for general info and rep was not helpful, claims doesn't take phone calls, and no Advanced Markets.

10 year rule in effect for non-spouse/non-exempt (if the 20yo isn't disabled/chronically ill) inherited IRA. RMDs may be required depending on owner's age at death.

Any major annuity company can administer these. FIA would have no potential for losses but some upside to grow the account

You should treat this like any growth strategy annuity client where they intend to distribute/liquidate within 10 years and may have to take annual withdrawals as well.

Nothing special/complex here. Just find a carrier you like and go with it.

 

[MAnnuity]

Thank you. Understand the aspect of rolling into another annuity. What if the desire is not to have it in an annuity, simply in an inherited IRA account?

 

[LostDollar]

Thank you. Understand the aspect of rolling into another annuity. What if the desire is not to have it in an annuity, simply in an inherited IRA account?

This:

10 year rule in effect for non-spouse/non-exempt (if the 20yo isn't disabled/chronically ill) inherited IRA. RMDs may be required depending on owner's age at death.

Your post is unclear to me about how your client wants to take the money.

If the plan is to hold the money for 10 years without any distributions, client should be prepared to deal with income tax effects (Federal and State) of lump sum distribution at currently unknown tax rates and brackets.

 

[LostDollar]

Annuity claim paperwork indicates options:

Annuitization options
Transfer to inherited IRA annuity with same carrier
Transfer to inherited IRA annuity with a different carrier

I am not an agent.

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If carrier means trustee

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If trustee does not charge a management fee and allows IRA holder to make a selection of fund investments from an array of cash, index funds and annuities
If IRA holder's current fund allocations have been increasing at an acceptable rate
And if the heir is willing to look in on things once in awhile and maybe make a small change or two

Those may be reasonable grounds for leaving the Inherited IRA with the current trustee. (Those are just considerations, not recommendations.) Your client's call.

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If the trustee does charge a management fee and asks for a client risk profile
and then invests the funds however their financial process says is appropriate,

And the heir could/would make some index fund decisions with a different trustee,

Those may be reasonable grounds for moving the inherited IRA to a different trustee. (Those are just considerations, not recommendations.) Your client's call.

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[Tahoe Ray]

Thank you. Understand the aspect of rolling into another annuity. What if the desire is not to have it in an annuity, simply in an inherited IRA account?

That's fine too. Same tax implications.

 

[Tahoe Ray]

This:



Your post is unclear to me about how your client wants to take the money.

If the plan is to hold the money for 10 years without any distributions, client should be prepared to deal with income tax effects (Federal and State) of lump sum distribution at currently unknown tax rates and brackets.

My post is based on the IRS rules. The client doesn't have (much of) a choice.

Factors such as the age of the owner at death and the status of the non-spouse beneficiary (eligible vs. not) dictate how/when the money needs to be distributed.

They can certainly take more than required and spread it out over the 10 years if they fear taxes will be much higher in the future.

 

[LostDollar]

My post is based on the IRS rules. The client doesn't have (much of) a choice.

Factors such as the age of the owner at death and the status of the non-spouse beneficiary (eligible vs. not) dictate how/when the money needs to be distributed.

They can certainly take more than required and spread it out over the 10 years if they fear taxes will be much higher in the future.

Yes.

When I said unclear -- I was thinking in terms of "funds remaining tax deferred as long as possible.

(Also op has not specified if funds are traditional or Roth.)

Taken to extremes, that would mean one withdrawal at the end of 10 years.

Other elements of op's post suggest op and client are discussing intermediate withdrawals.

Then op asks if there is a way to accomplish what they are trying to do.
very unclear question.

Is he asking, are RMD's required?
Is he asking, is there an exception here to allow client to go beyond 10 years fund holding period?
Is he asking, will IRS mandate withdrawal amounts, or can client choose?
Or......

I have personally had to struggle with a similar situation. Out of that, it is my personal opinion that OP has not provided enough specific info for you, Allen and SCA to give him (or her) the advice guidelines he is looking for.