required minimum distribution and rollover
I have a SPIA annuity that was set up in 2002 as qualified money, for medicaid planning, that paid for 105 months and then a lump sum at the end which was in 2011. The owner of the policy was taking his RMD in 2002 based on the SPIA payments. At the end of 2002 the owner died and his sole beneficiary was his wife. She opted to continue the monthly payments and take the lump sum in 2011 as indicated in the policy. The spouse was 72 at the time of the owners death. Each year her 1099-R reported the payments as a distribution using the code “4” in box 7 as being paid due to death and the 2011 1099-R will have the same code. The annuity was never renamed, it just continued in the deceased owners name and payments went to the spouse.
When she received the lump sum payment, per the SPIA terms, in 2011, is the full amount received considered an RMD payment or is the amount for the normal RMD (per the tables) considered the RMD and the excess would be able to be rolled over into another IRA for the spouse, and if so how must it be titled? She is still in the 60 day period available for rollovers. Or are the proceeds taxable because it was a SPIA with the final payment due at the end of the 105 payments.
Michael E. Dolce
Genworth Financial Securities
(863) 688-6685
Permalink Submitted by Alan Spross on Thu, 2011-02-10 02:25
While I cannot locate any cites that incorporate the final lump sum situation, there is no way that the RMD would be more than the distribution that was paid in prior years. One section of the RMD Regs for annuities discusses treating the final RMD using the lump sum as the prior year balance and then calculating the RMD based on the beneficiary’s attained age this year. But I don’t know whether that applies in this case or not. Once the RMD amount is firmly identified, the rest is available for rollover.
The insuror should be able to confirm what the RMD actually is, but certainly the 60 day period should not be allowed to expire or the IRS will have to be asked for an extension of the 60 days. The excess contribution correction procedures are not at all severe so long as the extended due date does not pass and a 6% excise tax is triggered. I would definitely roll the amount of the current year distribution that exceeds the distribution of 2010 if you cannot get something definitive by the 60 day rollover deadline.