Non-spouse beneficiary of an immediate annuity
The client has 2 SPIA period certain policies. One policy has a monthly payment of $500 and a balloon payment of $ 300000 at the end of 80 months. The other policy has a monthly payment of $2000 for 80 months without a balloon payment . The client passed away. The policy has 2 beneficiaries. Can the beneficiaries continue the policy in the same way till the end of the period? Will the balloon payment have any impact at the end of the 80 months?
Is it possible for them to transfer the balloon payment of $300000 they receive at the end of 80 months into an inherited IRA and defer taxes ? Please give your expert thoughts on this.
Permalink Submitted by Ponni Nainar on Wed, 2016-05-11 19:26
Can someone please share some thoughts on the treatment for the balloon payment to a beneficiary of a Single Premium Immediate Annuity?
Permalink Submitted by Alan - IRA critic on Wed, 2016-05-11 19:45
Beneficiary options are included in the contract provisions.Because of constant evolution of annuity products and complexity of the RMD Regs that do exist, the insurance company will have to determine the RMD amount for both the owner while living and any beneficiaries.Several variables are involved in this process. So these questions are best addressed to the issuing insurer. If the SPIA is not an IRA, no portion of the death benefit can be rolled over to an inherited IRA.
Permalink Submitted by Ponni Nainar on Wed, 2016-05-11 20:09
It is a qualified annuity within an IRA. The period of SPIA was 6 years and 8 months. The owner died after 40 payments. My question is in response to the balloon payment which is to be paid to the beneficiary. The SPIA is already annuitized as interest plus a small principal for 79 months and a balloon payment of $300000 as the final payment. The beneficiaries are to continue to receive the payments as in the original policy and when they receive the balloon payment of 300k after 40 months can they transfer it to an inherited IRA.
Permalink Submitted by Alan - IRA critic on Wed, 2016-05-11 21:31
Client’s age when SPIAs were purchased and his age at death (before RBD?) may be relevant. Was the second SPIA without the balloon considered annuitized? These are a just a few of the variables involved that the insuror will have to incorporate to determine whether RMD distributions have begun. Still not likely I can come up with a specific answer to your question though.
Permalink Submitted by Ponni Nainar on Thu, 2016-05-12 13:28
The client was more than 701/2 years old when the SPIAs were purchased. Both the SPIAs are annuitized. The client was taking the RMD requirements for both the SPIAs. He was taking more money from the second SPIA without the balloon to meet the combined RMD of both SPIAs put together. For example if the total SPIA for both was 500k He was taking 2300 monthly from the SPIA without the balloon and 300 monthly from the SPIA with the balloon which together worked out to 2600 /month.