Non-Qualified Annuity Stretch
My client, John Doe passed away in June 2013. He had a NQ VA, which the two primary beneficiaries are his daughters, 50% each. Daughter #1 took a 5-year payout option and the Daughter #2 decided to do an NQ annuity stretch. As for Daughter #2, who I’m only concerned about, when does she had to take her first distribution and what balance is used for that calculation? I was told by a source that her first distribution would be due on the 1st anniversary of her father’s date of death, and the calculation would be based on the ending balance of 12/31/13, same year of death. Also, I was told that would satisfy for tax year 2014. Is that correct?
Alek
Permalink Submitted by Alan - IRA critic on Mon, 2013-12-16 18:57
The IRA and qualified plan RMD rules do not apply to NQ annuities. Insurance company rules reflecting state rules where necessary determine the options. In this case it sounds like the insurer is offering a stretch which under IRA rules would not require the first RMD until 12/31/2014. However, the insurer might have opted to move that date up to the first anniversary of the DOD and that would be OK with the IRS.
Permalink Submitted by Aleksandar Krakovic on Mon, 2013-12-16 23:40
But this is not an IRA, but a Non-Qualified Annuity, so are the rules different? Alek
Permalink Submitted by Alan - IRA critic on Tue, 2013-12-17 00:04
Yes, they are established by the insurors of the annuity as indicated above. Some have chosen to adopt the IRA rules and some have not. There are also various state laws indicating when distributions must start for a NQ annuity. A beneficiary has no choice but to accept what the insurance company is telling them, other than reading what the contract itself indicates.