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How To Get The Most Of Your Inherited Annuity

Inherited Annuity

A lot of people are calling me because they've inherited an annuity. Let’s cover some of the recent laws that affect inherited annuities and what you need to know so you can make an informed decision on your terms and on your timeframe.

Okay. Inherited annuity. So you're a non-spouse. Let's talk about if you're just a non-spouse and you've inherited the annuity... All annuity companies are different and there are basic three options that you have. What I would encourage you to do, in addition to calling us at theannuityman.com, is to call the carrier at the 800 number on the statement. I would call that carrier, and you're going to get a non-sales person on the phone, and they're going to walk you through your options. After that, send us that statement and we can help you as well with what you want to do. Most of the time, you can either get a lump sum, or a lot of companies will say, "We'll pay you out over five years if you want to kind of lessen the tax blow." So that's option number two.

Option number three, even though not all companies do this, is you can say, "Turn this into a lifetime income stream, and annuitize it" which means to create payments. Once we get involved in the process, we can make sure that you're making the right decision, and we can explain some of the nomenclature and some of the verbiage that's within those choices.

In December of 2019 the Secure Retirement Act was passed, and one of the things that they changed with inherited annuities is that back before December of 2019, you could do what's called a stretch IRA. This means that you're taking the required minimum distributions, RMD's, on your life expectancy. With any type of tax situation, you need to talk to your local CPA or tax lawyer to make sure you're getting all the I's dotted and the T's crossed. Never take tax advice from a non-tax person. Even though I've been doing this for 30 years and the number one agent on the planet, we always get your local tax advisors involved with these types of situations, especially when you're inheriting an annuity.

The other thing that you need to understand with inherited annuity is "What do you want to do with the money? What is your goal with the money?" Now, the person that originally owned it, they had their goals. You might have different goals. And so that we can line you up with that based upon what you're trying to achieve. But just don't accept somebodies opinion. You want to make sure you're doing the right thing. And you also want to make sure that you're not triggering taxes that don't need to be triggered.

Turn this into a lifetime income stream, and annuitize it

For example, if a spouse inherits an annuity, the RMDs are going to be taken over the spouse's life expectancy, but there are some occasions that that first year, depending on when they die, and I don't want to get in the weeds here, but just understand that there might be that year or timeframe you have to take the RMD based upon the deceased person's life expectancy. I know that sounds crazy, but there are some machinations to it that we can help you with.

Because you have single premium immediate annuities, deferred income annuities, qualified longevity annuity contracts, variable annuities, fixed index annuities, multi-year guarantee annuities. Some of those from an income stream standpoint, if you inherited them, you might've inherited the remaining income stream that's left. But for the deferred annuities like multi-year guarantee annuities or indexed annuities or variables, that's when it gets a little difficult from the standpoint of you just making decisions.

Ultimately, you need to find out what the objectives of the annuity are.

Never forget to live in the reality, not the dream with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.


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