Beneficiaries want to annuitize inherited IRA
Client in RMD mode passed away this year and left her 62 yr old and 70 yr old daughters her IRA currently in mutual funds. If they choose to roll the funds into an annuity and annuitize, and choose life with full cash refund will that satisfy the RMD requirements or should they take it all out within the 10 years (so 10-yr period certain)? We believe once this first year’s RMD is satisfied the annuity payments will cover the RMD in future years, but with all of the nuances we want to double check!
Thank you “gurus”!
Permalink Submitted by Alan - IRA critic on Tue, 2023-03-28 18:44
It may be very difficult to find an insurance company that will annuitize an inherited IRA. Perhaps this is due to limited demand for this and/or lack of clarity in the IRS Regs regarding annuitization of inherited accounts. The 10 year rule will apply irregardless, so any annuitization would be truncated in year 10, making this even more uncertain since the Secure Act. I’m not sure if the insurance companies understand IRS Reg 1.401(a)(9)-6 either, but up to now the IRS has exercised very little oversight regarding inherited IRA RMDs, even when not annuitized.