- Thread starter
- #11
- 2,584
I believe this is what happened. Nothing was ever reported to the IRS when this retitling happened. I hope there is a way to undue things.
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Non Spouse Beneficiary-NQ Annuity-10% Early Withdrawal Question
- Thread starter CALTCAgent
- Start date
I believe this is what happened. Nothing was ever reported to the IRS when this retitling happened. I hope there is a way to undue things.
- 4,882
Agree, but there was a period of time where carriers did issue NQ annuities with joint owners & ownership changes. I believe IRS later clarified this shouldn't be happening. Is it possible the carrier deleted 1 of 3 joint owners when the 1 died.
The other question i have is who does the check & 1099 come to? Is it 1 person or both
Highly unlikely you can undo this unless there was major carrier error. There is risk they find error & have to issue payment in full, etc
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- 4,882
Yikes. maybe the pre 1986 products were grandfathered in & could be assumed byore than just the spouse. So, maybe the claim was processed as an assumption rather than the other choices.
Some contracts issued before 1980 also have special rules that could have provided a step up in basis at death which could eliminate alot of the tax issue & the 10% penalty except for interest after death
Joint owners can continue the annuity on an owner-driven contract. Same with a spouse who is unnamed.
This is a group annuity that likely doesn't have those options so I omitted that possibility.
- Thread starter
- #15
- 2,584
You are right. I didn't want to mention this to make things more complicated. This annuity is pre 1979 and there is a stepped up in basis grandfather clause out there. Thats the very reason the pre 59.5 age beneficiary took out some money now. They wanted to find out if it applied. Sort of see what the IRS says now. They have been to CPA's and they all feel uncertain what to do and how to handle this.
Just to clarify. One person owned the annuity when they died. 3 people inherited it and took their 1/3 portion and left it with the carrier. 2 of the 3 are over 59.5. The under 59.5 owner wants to see how it will be taxed because of so much confusion, so they took a withdrawal.
- Thread starter
- #16
- 2,584
Yes. The carrier said ownership could not stay the same with three different beneficiaries. I think thats what you are saying. Therefore all 3 must put the annuity in their name.
- 4,882
Is it in 3 separate contracts with 3 separate policy #s now or 1 contract somehow with 3 owners?
- 4,882
IRS really doesn't say much. It really heavily depends on how carrier reports the 1099 & if the carrier recognized the step up in basis at death if it was pre 1980.
Unrelated, I am shocked how many financial reps don't process the step up in basis for brokerage account assets when 1st spouse dies. With the massive gains many currently have along with how many seniors have died during Covid, some surviving spouses can sell a lot of stocks/funds they think they owe gains on & actually sell them with no capital gains if they process the step up in basis for the surviving spouse if jointly owned or in revocable trust. Just helped a neighbor go back & process such with her brokerage account from 18 months ago & avoid nearly $500k in capital gains.........and she has a fee based planner & I am merely a life licensed peon.....lol
This is precisely the reason why you never want to die owning an annuity.
Distribute it asap!
- Thread starter
- #20
- 2,584
I am not sure. I know that all 3 beneficiaries have the same policy #.
