Annuitized IRA with a 15-Period Certain
Hello,
A client who has a Traditional IRA Variable Annuity that has been annuitized with a 15-year Period Certain recently passed away. The client is over the age of beginning RMD, 76 years of age upon passing, and has 13 more years of certain period.
I understand that the beneficiaries, his children, can still receive 13 more years of income payments as per the period certain. There is also an option to receive a lump sum benefit of the approximate total monthly payments.
My question – if they opt for lump sum and transfer the money into an Inherited IRA, I assume they have to spend down the assets within 10 years.
However, if they choose the monthly payment, they can receive around 13 years of payments? Do they have restrictions or rules that they have to take the lump sum or can they circumvent the 10-year rule if they continue with the monthly annuitization for 13 years?
Permalink Submitted by Alan - IRA critic on Mon, 2024-12-23 11:38
Unless the beneficiary is an EDB, they are subject to the 10 year rule regardless of the period remaining in the annuity, therefore if the annuity is continued they will be required to receive a lump sum distribution in year 10 (2034).
The insurance company may or may not be willing to cooperate in a non reportable transfer of a current lump sum to inherited IRAs elsewhere where the 10 year rule will also apply, so care must be taken to ensure that an actual lump sum distribution payable to the beneficiaries is not made, since such a distribution will not be eligible for rollover.