Distribution of IRA Annuity to beneficiary after death

Submitted by Jan Day on Wed, 2018-06-20 20:21

I have two IRA Annuities requiring RMD. Upon my death the remainders go to 2 sons and one granddaughter. Upon my death would the heirs have to set up inherited IRA’s or are there other options and can that money be spread out over their life time?

Also, have the option of taking a yearly amount of one of them for the rest of my life using that for a portion of the RMD on the other annuity, Is there a tax advantage for me or my heirs to do that?



Submitted by Alan - IRA critic on Wed, 2018-06-20 21:10

  • Your beneficiaries should establish separate inherited IRA accounts in order for each to use their own life expectany for RMDs. However, some insurers may be more restrictive with the most restrictive being to require a lump sum distribution instead of offering a life expectancy stretch. The IRS RMD requirements cannot be broadened, but they can be restricted. The annuity contract should be carefully examined, and if the options are not clear ask to have them clarified. Of course, a beneficiary can only move inherited IRA accounts by direct transfer, they cannot roll over a check made out to them personally.
  • You can aggregate your RMDs between all your IRA accounts, whether annuities or not. There is no tax advantage, just a convenience advantage, or a tool to drain one account sooner than another.  Your beneficiaries would probably be happy to only have to deal with insurance company or contract rather than two, assuming the same inherited amount.

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