IRA annuity question

Submitted by Robert Roselli on Tue, 2024-02-20 18:46

I had a client with an IRA fixed annuity who was receiving fixed payments every month. The passed away in November 2023. We didn’t notify the annuity company until January 2024. The annuity company paid out two payments it shouldn’t have (December 2023 and January 2024). When her daughter was filling out the claim forms, the annuity company asked if they wanted to pay back the two months or deduct those two months against the remaining balance.

Since the decedent received a payment in January 2024, what will be the tax impact when 2024 taxes are done? Should we call the annuity and see if we can still pay back January’s payment?



Submitted by Alan - IRA critic on Tue, 2024-02-20 19:31

Yes, this is a problem with periodic payments, since the distributions made after the DOD should go to the beneficiary and be reported by the beneficiary. In this case, you also have two different tax years. The 1099R issued to the client will have the Dec payment included, which should technically be reported and also deducted on client’s final return and the nominee process used to transfer the Dec amount to the daughter. The January payment should be returned if the company will take it back and the daughter can then decide on her RMD options. But I doubt that the company will reissue the 1099R for 2023.

Submitted by Robert Roselli on Tue, 2024-02-20 19:52

We will call the company tomorrow. Worst case, they issue a 1099-r for one month’s payment to the decedent for 2024. Then what, they have to do another tax return? Would there be anything else needed?

Submitted by David Belk on Tue, 2024-02-20 20:05

“Receiving Payments” needs to be defined.  Was she simply  taking a monthly interest check, was it a true” periodic payment structure”, was a withdrawal benefit under a life time income payout, the asnwer to this question determines the tru answer. If it was a periodic payment the answer above is correct.  If it was monthly interest checks OR  lifetime income rider the answer could be as the Annuity company offered you.

Submitted by Robert Roselli on Tue, 2024-02-20 20:39

Back in September 2021, the decedant elected to receive 60 equal payments of a SPIA (single premium immediate annuity). The payments were $ 5,296.92 with the majority of the payment taxable. She passed in November 2023. She received $ 10,593.84 (December 2023 + January 2024 payments). The annuity company was notified in January. They gave the beneficiaries the option of repaying the $ 10,593.84 or having that deducted against the final amount. I filled out the claim forms, but the beneficiaries haven’t started receiving payments yet. I hope this helps. Please let me know if you need any additional information.

Submitted by Robert Roselli on Tue, 2024-02-20 20:40

The beneficiaries elected to not repay the $ 10,593.84. The two months were sent by direct deposit into an account the decedant held jointly with her daughter.

Submitted by Alan - IRA critic on Tue, 2024-02-20 22:31

With the joint account that I assume was under the SSN of the decedent, daughter has received the funds by inheriting the joint account, but a 1099R has been  issued for 2023 to the decedent, which will have to be reported on the decedent’s final return.  There will also be a 2024 1099R issued next year to the decedent which may not be large enough to cause a  problem for the executor since the decedent’s final 2023 tax return will have long since been filed. 

Add new comment

Log in or register to post comments