Avoiding Taxable Event With Spouse Beneficiary
With a death benefit payable to a spouse beneficiary from and IRA annuity, how does she title the annuity with another company to receive the check when she reassign it to avoid taxes on the check?
With a death benefit payable to a spouse beneficiary from and IRA annuity, how does she title the annuity with another company to receive the check when she reassign it to avoid taxes on the check?
Permalink Submitted by Alan Spross on Mon, 2009-04-13 22:05
What is her age AND age of deceased spouse when he passed?
Permalink Submitted by Anthony Bolden on Tue, 2009-04-14 03:05
She is age 55. The deceased spouse died at age 54.
Permalink Submitted by Alan Spross on Tue, 2009-04-14 03:53
She can roll this over to her own IRA and that will avoid taxes, but can produce other problems.
If the current insurer will offer a direct transfer, the proceeds can be directly transferred to an inherited IRA in beneficiary form and she can take distributions from the IRA without paying an early withdrawal penalty until she is 59.5 can then then roll it over to her own IRA. A check cannot be issued to her in this situation.
If the insurer will not offer a direct transfer and she needs funds prior to 59.5, she can do the rollover to her own IRA. She could also start a 72t plan if she needs regular distributions prior to 59.5 as that will eliminate the penalty. This plan would have to maintained for 5 years in her case.
Another option to explore if the company will not do a direct transfer is to determine what options they offer to leave the account there until age 59.5. She does not have to take any RMDs until the year her husband WOULD HAVE reached 70.5.
An inherited IRA title would show “Betty Smith, as beneficiary of Donald Smith”, although other formats are OK as long as both names appear in the registration. But note that if she receives a death benefit check from the current insurer, she cannot continue to treat this as an inherited IRA, and will have no choice but to roll it over to her own IRA.
Permalink Submitted by Bruce Steiner on Tue, 2009-04-14 16:56
See PLR 200450057.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL