Beneficiary options for a qualified immediate annuity
Can a beneficiary of a Single Premium Qualified Immediate Annuity roll over a lump sum death benefit to another IRA? The owner passed away after receiving payments for 5 out of 10 year period certain annuity. The insurance company offers a commuted benefit option for the remaining payments. Can the beneficiary do a Trustee to trustee transfer of the lump sum payment? Will the treatment be different if spouse is the beneficiary? Are roll overs allowed for annuitized contracts?
Please share your views.
Permalink Submitted by Alan - IRA critic on Tue, 2019-07-23 16:32
If the beneficiary wanted a receiving inherited IRA custodian to accept a direct transfer of the lump sum and re establish the remaining 5 years, it is not clear whether the IRS allows that, but it is highly unlikely that a new IRA custodian would accept such a transfer in the first place. However, if the beneficiary were a surviving spouse, the spouse could roll it over to their own IRA.
Permalink Submitted by Ponni Nainar on Wed, 2019-07-24 16:12
Thank you Alan for your response. Can the beneficiary have the option to transfer it as an Inherited IRA and start taking pay-outs based on his life expectancy instead of taking the money out in 5 years?
Permalink Submitted by Alan - IRA critic on Wed, 2019-07-24 19:55
No. The annuity payment is a distribution and is treated as an RMD which is ineligible for rollover. As indicated above, even if the insurance company had not commuted the benefit, it could only have been stretched for 5 years more. My prior response should be rephrased to indicate that in order to get the 5 years of stretch, the beneficiary would have to convince the insurance company not to commute the remaining benefit. Once they distribute it, they are not going to change their mind.