INHERITED NON-QUALIFIED ANNUITY

Submitted by Tom Mcglothlen on Tue, 2019-03-19 16:48

I HAVE A CLIENT WHO IS BEING TOLD SHE HAS TO START RMD’S ON AN INHERITED NON-QUALIFIED ANNUITY.
MY RESEARCH SHOWS THIS NEEDS TO START ONE YEAR AFTER HER MOTHER PASSED. IT CAN BE DONE OVER 5 YEARS , MY CLIENTS LIFETIME AS AN ANNUITIZATION OR YEARLY WITHDRAWALS CALCULATRD AT HER AGE.

ANYONE OUT THERE HAVE AN ANSWER OF HOW TO HOLD THESE WITHDRAWALS OFF FOR ANOTHER FIVE YEARS OR MORE ??
THANKS,
TOM



Submitted by Alan - IRA critic on Tue, 2019-03-19 17:25

If the 5 year rule is permitted and elected, there need be no distributions until 5 years from the DOD, however that would result in a spike in taxable income for that year. Unless the amount is small, taking life expectancy RMDs will be more tax efficient, even though the gains on the contract will be distributed first unless the annuitization option is chosen. There is no way to defer RMDs other than the 5 year rule. A 1035 exchange will not accomplish this.

Submitted by Bruce Steiner on Mon, 2019-03-25 01:26

  • There is usually no good solution to an investment-type annuity.  If she takes it all at once, that will bunch the income into a single year.  If she defers it, she’ll continue to incur the costs of the annuity (often around 3% a year), and she’ll turn the future investment income and gains into ordinary income.
  • Taking it over 5 years is often the least bad of the choices.

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