A client is the beneficiary of an annuity policy. The annuity is qualified money and my client is not related to the annuitant who recently died. Can my client transfer the proceeds to another annuity or to an IRA? She doesn't need the money now and she would like to avoid current taxation if possible. Thanks.

It sounds like your client is the bene of a plan, and the plan happens to have invested the participant's money in an annuity. If the money is taken in 2006, your client has no choice but to take it as a taxable distribution. If she waits until 2007 (new law), she can roll it to an inherited IRA in the name of the participant and then take systematic distributions over the participant's life expectancy. I'd guess that the annuity will simply pay a death benefit to the plan which will act as a conduit for your client.

I’m wondering, by ‘annuity’, do you mean IRAnnuity ? If so, then the assets can be transferred to an inherited IRAccount.

It is an IRA Annuity. The decedent had rolled her 401(k) account into the IRA Annuity when she retired several years ago. On the IRA Annuity policy, she named my client as the beneficiary. Appleby, your answer indicates that yes, my client can transfer the proceeds into an inherited IRA and avoid current taxation, correct?

When does my client have to start taking distributions from the inherited IRA? When she turns 70 1/2? When the original policy holder (decedent) would have turned 70 1/2 (my client is younger than the decedent)?

Thanks for your help on this. I've gotten three different answers from the insurance company that issued the policy so I'm understandably confused on this issue.

I though so- as I do know some individuals use ‘qualified’ to refer to all retirement assets, including IRAs. Technically, ‘qualified’ is used to refer to qualified plans, such as 401(k) plans- hence the response from Bird.

Yes. The assets can be transferred to an inherited IRA that is registered in the name of the beneficiary, as ‘beneficiary of’ the decedent, and using the beneficiary’s SS#. For instance, John Brown B/O Mary Smith or Mary Smith (Decd), John Brown (Bene)


It seems that the annuity owner died before the required beginning date, which means that the assets can be distributed over the five year period of over the single life expectancy of the beneficiary. Most IRA agreements default to the life expectancy option. The IRA agreement should be reviewed to determine if any restrictions apply- for instance- whether it allows only the five year option

Thanks Appleby. Your answer is just what we were hoping for.

I agree with Appleby (yes, I thought this was qualified plan money based on the forum placement and language used).

fiddler, some investment companies use the term "beneficiary payout" IRA. If you run into any roadblocks from companies telling you that you can't do this, try that terminology and that might ring a magic bell.

Thanks Bird. I'll keep that in mind.