Non-qualified annuity distribution…
A client has a non-qualified annuity, joint ownership between him and his spouse. He would like to take a 100% distribution (principle and interest). Here’s my question…he is over 59 1/2 years of age, however, his spouse is NOT. Do they have to pay penalties on the interest withdrawn or because one of the two co-owners are over 59 1/2 no penalties would be owed? Maybe I need to remove the spouse that is not 59 1/2 off the contract, then redeem?
Permalink Submitted by Alan Spross on Fri, 2009-08-07 21:18
Yes, removing the younger spouse’s name prior to distribution is what you would have to do. If you order a full distribution as is, the company is supposed to issue a 1099R to each joint owner on a pro rated basis. This would result in the wife’s 50% portion of the earnings being subject to the early withdrawal penalty.
Permalink Submitted by Al Fry on Sun, 2009-08-09 01:36
I would first check with the Company. For example my former company issues the 1099 to the SSN on the contract (the primary owner). The other joint owner is the secondary owner.