Take, for example, a husband and wife with one child. If upon his death, the husband wants his wife to continue to receive income from the annuity for the rest of her life — at which point, they want their child to collect the proceeds — he can designate himself as the owner and annuitant, his wife as the beneficiary, and his child as a contingent beneficiary.
Alternatively, you may consider a joint and survivor annuity to guarantee that payments last for the duration of your life and the life of one other person. This person, usually a spouse, is a second annuitant, not a beneficiary. Joint and survivor annuities allow the surviving spouse to continue on the existing payment schedule. However, this arrangement will prevent the surviving spouse from taking a lump sum from the annuity should they need it for funeral and burial expenses.
Whereas the annuity owner and the annuitant may be the same person, a beneficiary is a separate person or entity. The beneficiary is the person who is entitled to the remaining cash-value of the annuity upon the death of the annuitant or annuitants. Spouse beneficiaries are permitted to take over as the owner of the annuity, continuing to receive periodic payments and deferring income tax.
This is not the case with non-spouse beneficiaries. A fundamental difference between spouse beneficiaries and non-spouse beneficiaries is the manner in which they are required to collect the funds. You, as a non-spouse beneficiary, have no ownership rights to the contract. Lastly, a fourth designation that may exist in an annuity contract is the payee. The payee is the person who receives the payments from the annuity.
This payee is appointed by DFAS. This will ensure that you structure your annuity contract appropriately. If you have questions about the specific designations, payout options, tax implications or other features, contact a professional advisor for assistance.
You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines. Click here to sign up for our newsletter to learn more about financial literacy, investing and important consumer financial news. If you're interested in buying an annuity, a representative will provide you with a free, no-obligation quote.
SMS is committed to excellent customer service. The company can help you find the right insurance agent for your unique financial objectives. Your web browser is no longer supported by Microsoft. Update your browser for more security, speed and compatibility. If you are interested in learning more about buying or selling annuities, call us at Annuities View Subpages. Sell My Structured Settlements. Getting Court Approval. Settlement Loans.
Structured Settlement Calculator. Sell Your Payments View Subpages. Selling My Payments. The Selling Process. Reasons to Sell. Selling for Retirement. Cash Out. Partial vs. Lump-Sum Sales. Withdrawing vs. Surrender Charges. Selling Lottery Payments. Selling Mortgage Notes.
Retirement View Subpages. Required Minimum Distribution. IRA or k Rollover. The Four Percent Rule. Social Security Retirement Benefits. Planning For Retirement. Life Expectancy Calculator. Health Care Costs. Retirement Lifestyle. Retirement Risks. Estate Planning. About Us View Subpages. About Us. Editorial Guidelines. Our Partners. Press Room. Contact Us. Glossary of Financial Terms. Financial Advisors. How to Become a Financial Advisor. Financial Literacy. Written By : Elaine Silvestrini. Edited By : Emily Miller.
Financially Reviewed By : Marguerita M. This page features 8 Cited Research Articles. Fact Checked. Key Takeaways Annuity contract terms do not change after your loved one passes away.
The type of annuity purchased will continue paying out the same way it had been for the original annuitant. Spouses have more control over changing the terms of inherited annuities. Taxes owed on an inherited annuity will depend on the payout structure and the status of the beneficiary. The original annuity contract dictates how payment streams are taxed.
This guide will explain how much money you need to save to retire at various ages earning various income amounts. If you October 27, If you are close to transitioning to retirement, check our Retirement Planning Guide.
If you are not October 26, CDs Vs. Annuity Pension Vs. The owner becomes an annuitant or names a new annuitant. The trust can be the annuity owner as long as the trustee is named the owner and the trust is the primary beneficiary.
Many annuities allow for a spouse to decide what to do with the annuity after the owner dies. The spouse can choose to have the annuity in their name, assuming that they meet all of the requirements and obligations of the original agreement and delay any tax consequences.
They will collect all remaining proceeds, payments, benefits and make decisions about who should receive proceeds. A spouse takes over the annuity and becomes the annuitant when the other spouse dies. This is called a spousal continuation. The surviving spouse can keep their tax-deferred status and have stability for a long time.
Joint and survivor annuities also allow someone to take over the contract in a stream of payments rather than one lump sum. Inherited annuities are taxable as ordinary income. When someone inherits an annuity, they owe taxes on the proceeds. If a beneficiary chooses to take the money all at once, they have to pay the taxes right away.
This is only if you choose a lump sum. If a beneficiary chooses to take the money over time, the taxes are not owed until the money is withdrawn from the annuity.
If the spouse is the primary beneficiary and elects the spousal continuance provision, the contract continues as if the surviving spouse owned the original contract. It maintains its tax-deferred status, meaning the beneficiary owes no immediate taxes. Non-spousal beneficiaries can withdraw the proceeds over five years.
Since the taxes are only owed when withdrawing income, the beneficiary can prevent falling into a higher tax bracket. But there are things you can do to minimize the tax hit. However, there are potential negative tax consequences if the Owner and Annuitant are not the same. If you borrow against an existing policy to pay premiums on a new policy, death benefits payable under your existing policy will be reduced by the amount of any unpaid loan, including unpaid interest.
A contract owner can control the distribution to beneficiaries by electing a Beneficiary Designation with a Restricted Payout. Beneficiaries can find lost death benefits from annuities by contacting the National Association of Insurance Commissioners. You can do this with a death certificate from the funeral home that conducted the burial or cremation.
0コメント