Questions re Content in October IRA Advisor
Sorry to bother about this. I just finished reading the article in the October IRA Advisor by guest IRA expert, “Tax and Estate Planning with Non-Qualified Annuities.” I thought the exclusion rule could only apply if the NQ annuity was annuitized? The article discuss taking withdrawals and having tax treatment pro-rated (and no mention of the term “exclusion rule.”) I don’t see how this can work but I am not an expert and this is inherited money. Does that make a difference? The second strategy discusses splitting the inherited NQ annuity into two contract and surrendering one of the two contracts after that in order to access a larger amount of money right away. The article makes no mention of the 180 day rule when doing that, which applies for Partial 1035 exchanges. I thought it would apply, but again I may be wrong. Again, this is inherited money so maybe that makes a difference. Am I missing something in one of the big bills that have become law in the past decade? Thank you much. Paul McGillivray
Permalink Submitted by Alan - IRA critic on Mon, 2025-09-22 22:07
I can’t access the IRA Advisor articles, but your interpretation makes sense that the exclusion ratio only applies to annuitized contracts. Inherited accounts generally adhere to the same distribution rules that would have applied to the owner, so perhaps the author is addressing a situation where the inherited annuity can be annuitized by the insurance company, and I think that is unlikely for most companies.
The IRS has approved 1035 exchanges for NQ annuity beneficiaries since about 12 years ago.
These rules were not altered by either Secure Act.
Permalink Submitted by Paul McGillivray on Tue, 2025-09-23 09:07
Thank you, Alan. I read the article about 5 times before posting yesterday. The guest author probably knows the rules but does not have very strict editor of his copy. No worries. Paul