Successor Beneficiary Inherited SPIA
Our SPIA allows the successor beneficiary to choose a commuted value or continue to receive payouts once the IRA owner has died. Is this permitted under the IRA regs for a single premium immediate annuity that is deemed to satisfy the RMD requirements by being treated as a pension?
Is it up to the insurance company to decide this?
Permalink Submitted by Alan - IRA critic on Sat, 2016-08-20 00:54
The IRS Regs for annuities and DB plans are mostly concerned with arrangements that prolong distributions at a slower pace than RMDs when there is an account value. Therefore, the commuted lump sum payment is no problem at all other than being fully taxable in the distribution year. The potential problem would lie with offering a period certain for the beneficiaries that is longer than their single life expectancies, and the insurance company should be aware of those restrictions. The question to be asked of the insurance company is whether they can provide a statement that the beneficiary RMDs meet the requirements of IRS Reg 1.401(a)(9)-6, which is very complex for individuals to understand. The insurance company should understand these rules, if the question is addressed to the appropriate resource within the company. Again, for the commuted value there is no problem as a faster distribution is never a problem.
Permalink Submitted by shelley kosrunek on Mon, 2016-08-22 20:09
Thank you for the response – if the designated beneficiary does not want the commuted value lump sum payment, can the insurer allow the designated beneficiary of an IRA annuity (SPIA) to transfer the commuted value to another insurer as an Inherited IRA? Would your response change if the designated beneficiary was a spouse vs a nonspouse?