Transferring annuity proceeds to IRA

[MAnnuity]

"The funds in the annuity do not perform as well as those in the IRA but on the other hand, I am guaranteed $25,000 per year until death at which time, whatever remains goes to my wife as an insurance death benefit."

Also not a tax pro but generally speaking, an annuity death benefit is taxed differently than an insurance death benefit. I encourage you to get clarification from a professional regarding the tax liability that your wife would potentially be subject to in the event you passed away while the annuity still has cash value.

 

[DoctorDu]

MAnnuity is correct. The death benefit under an annuity contract is taxable to the extent the proceeds exceed the tax basis (premium less basis recovered as tax free portion of each annuity distribution). Unlike capital assets such as mutual funds, annuities are considered "income in respect of a decedent" and do not get a fresh basis at triggering death.

 

[Tahoe Ray]

Folks, this tax discussion is silly.

Either the advisor is a moron and telling the client to liquidate a NQ annuity and move it into his IRA (which he can't do) so a non-starter OR the VA is already qualified and all of this tax talk is moot.

 

[Allen Trent]

Folks, this tax discussion is silly.

Either the advisor is a moron and telling the client to liquidate a NQ annuity and move it into her IRA (which she can't do) so a non-starter OR the VA is already qualified and all of this tax talk is moot.

I thought the same. only confusion I think that started the tax talk is the OP said they made the original annuity purchase in 2007 for $320k. maybe some took that literally & didnt think it could have been a rollover/transfer of an existing 401k/IRA that funded the Variable Annuity IRA

 

[DHK]

Why is everybody so afraid of giving "tax advice" surrounding OUR products???

 

[Allen Trent]

Why is everybody so afraid of giving "tax advice" surrounding OUR products???

in some cases, depending on the persons licenses, it may be prohibited & in most cases tax advice isnt covered by a life insurance agents E&O coverage

 

[Sheryl J Moore]

Yeah, we have to give the disclaimer that we are not tax experts in Iowa. sjm

 

[Tahoe Ray]

Yeah, we have to give the disclaimer that we are not tax experts in Iowa. sjm

Are tax implications the same as tax advice?

Can I tell someone that something is illegal or am I guilty of "practicing law?"

I get the spirit of the regs, but some of them just defy common sense.

 

[DHK]

in some cases, depending on the persons licenses, it may be prohibited & in most cases tax advice isnt covered by a life insurance agents E&O coverage

Tax advice surrounding our products is considered incidental advice, not tax filing advice. No one should be giving advice on how to file tax forms unless you're so registered as a tax preparer, EA, or CPA.

In fact HIDING behind a license to NOT give proper advice surrounding our products should be the textbook definition of errors and omissions.

I'm not talking about one's total tax situation. I'm only talking about how our products work.

And you can tell who has commented in this thread who doesn't know what they don't know.

If one doesn't understand the major points of the tax code, they simply cannot give quality advice about life insurance, annuities, and qualified retirement plans. Period.

Of course, this increased focus on tax planning (not filing) has led The American College to create their TPCP or Tax Planning Certified Professional (which I keep reading as toilet paper certified professional):

Tax Planning Certified Professional® Program

Gain the foundational knowledge you need to include comprehensive tax planning in your financial plans with our TPCP™ designation.

www.theamericancollege.edu

 

[DHK]

In fact, I'm reminded of this older article:

FINRA Award Goes to Client After Advisor’s Tax Oversight by Ed Slott.

https://www.oxfordrmg.com/wp-conten...s-to-Client-After-Advisor-s-Tax-Oversight.pdf

Ignore the tax consequences of a client's decisions at one's own professional risk.