IRA Death claim
Deceased had IRA Annuity. If beneficiary (spouse) takes the money over five years to get $23,000 more in benefits the custodial company calls it annuitization. Does this preclude the beneficiary from rolling over the proceeds? Would she have to pay the taxes as received because this is called annuitization? If she can rollover can she then put it in her own IRA?
Permalink Submitted by Alan Spross on Tue, 2012-03-20 23:07
An IRA is not a “qualified plan” and therefore the rollover restrictions of “eligible rollover distributions” do not apply.
If these payouts are NOT considered RMDs, they are eligible for rollover whether the insuror refers to them as annuity payments or not. You need to determine whether any of these payments are RMDs or not.
For example, if the surviving spouse was the sole beneficiary, then she does not have an RMD obligation before the deceased spouse would have reached 70.5. Payments would also be RMDs if the decedent has annuitized the IRA over their joint lives, but that is not the case here.
If the payment is NOT an RMD, then it can be rolled over.
If the decedent was over 70.5, then the spouse must start RMDs based on her life expectancy if she maintains the IRA as inherited instead of owned. Her RMD may well be less than the annual payout. If this is the case, the portion that is her RMD cannot be rolled over, and the rest can be rolled over. Any amount that she does not rollover, ie the RMD will be taxable in the year received. Any yes, the portion that she can roll over because it is not an RMD can be rolled into her owned IRA.