Annuitizations and RMD
A client has annuitized a qualified variable annuity. Can the monthly distributions she is receiving count toward any other RMDs that she must satisfy?
A client has annuitized a qualified variable annuity. Can the monthly distributions she is receiving count toward any other RMDs that she must satisfy?
Permalink Submitted by Alan Spross on Fri, 2008-11-07 21:28
If this is an IRA annuity, the annuitized distribution can only be aggregated with other IRA RMDs in the year of annuitization since there was a prior year end balance for all the IRA assets. In subsequent years, the annuitized distribution satisfies only the RMD for the annuity and the other RMDs must be calculated and distributed separately.
Permalink Submitted by Al Fry on Mon, 2008-11-10 15:38
Unless the annuity is held in a self-directed custodial account with other IRA assets, then they are aggregated, since the payments are made to the custodian, not the annuitant.
Permalink Submitted by Alan Spross on Mon, 2008-11-10 18:24
Al,
In such a custodial account, where would the total prior year ending balance come from, even if only a small portion of the total account had been annuitized?
In theory, a present value calculation could be done on the annuity payment, but I have yet to find anything in the DB and Annuity Final RMD Regs issued in 2004 suggesting this approach.
Permalink Submitted by Al Fry on Mon, 2008-11-10 22:12
Alan – All annuitized contracts have a value, at least for estate planning purposes. Whether that vaue could be used or not, I do not know. The most-used annuitization with the annuties I support all have an account value. This is the value the contract could be surrendered for. It is referred to generically as “hybrid annuitization”. I do not run into too many that have normal annuitization, unless they are fixed, which I do not support. Everyone else uses the guaranteed withdrawal benefits on VAs, which are RMD-friendly. Not much reason to use regular annuitization.