Beneficiary options for an IRA Annuity in payout phase
Client is the sole beneficiary of a period certain annuity payment stream that was funded by an IRA.
The annuity company has indicated only lump sum (taxable in one year) or continuation of payment as available beneficiary options.
The annuity company will not direct transfer the lump sum balance to an Inherited IRA for the beneficiary.
They claim this is not an available option because the IRA was in payout phase not a deferred state.
Is this correct?
Permalink Submitted by Alan - IRA critic on Sat, 2020-10-31 03:58
This falls under IRS Reg 1.401(a)(9)-6 which is extremely complex. Very little in this Reg is dedicated to annuitized accounts post death. From what I can tell, the annuity must be continued as is until the period certain ends or cashed out. Note that the annuity payout has been based on the mortality tables for the IRA annuity owner as modified by the period certain length. There are no rules that allow the beneficiary to start over with continued tax deferral of any lump sum payment.