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catonsville · Apr 10, 2014, 01:10 PM

What happens to an IRA Account and IRA Annunity when a spouse passes? Does
It rollover? Are there any tax problems? What about an IRA annunity that has a 10 year contract and you are in the 4th year of ownership?

ma0641 · Apr 10, 2014, 01:54 PM

Depends on how the original contract was worded. Typically the spouse would get the rollover. No tax as long as it is rolled over. Annuities are a bit different. They have any number of ways they are paid so you need to read the contract.

ScottGem · Apr 10, 2014, 04:46 PM

IRAs and annuities generally have beneficiaries. So the named beneficiary would become the owner. It would pass to them outside the estate. However, there are a number of rules on how this is handled exactly. I would suggest consulting with a tax specialist for details.

catonsville · Apr 10, 2014, 06:13 PM

Originally Posted by ScottGem

IRAs and annuities generally have beneficiaries. So the named beneficiary would become the owner. It would pass to them outside the estate. However, there are a number of rules on how this is handled exactly. I would suggest consulting with a tax specialist for details.

My wife passed away 2 days ago. I have a fed refund coming and a small state tax to pay, but I have hit a snag on a K-1 and want to file for an extension.
What do I do, pay what I think I owe the state and just file for the extension? I am using Turbo Tax

ScottGem · Apr 10, 2014, 06:35 PM

My condolences. I'm going to let our more knowledgeable tax experts help with this.

ebaines · Apr 11, 2014, 09:42 AM

My condolences to you, catonsville. Now is not the time to be too worried about your taxes - you have other more critical things to deal with. My advice is file for an extension and pay the amount you think you will owe before April 15. Then you have until October to finalize your 2013 tax filing.

As for the IRA - some time in the next month or two give the administrator a call and ask what the procedure is to put the account in your name, assuming you are the named beneficiary. They will most likely require some forms filled out plus a copy of the death certificate. Same thing with any other accounts she may have had, including insurance policies, and also any joint accounts that need to be retitled - joint savings and/or checking, and joint ownership of your house or cars are pretty typical. Depending on how many accounts are involved you may find you need 10-15 copies of the death certificate to take care of them all.

catonsville · Apr 11, 2014, 02:44 PM

Originally Posted by ebaines

My condolences to you, catonsville. Now is not the time to be too worried about your taxes - you have other more critical things to deal with. My advice is file for an extension and pay the amount you think you will owe before April 15. Then you have until October to finailize your 2013 tax filing.

As for the IRA - some time in the next month or two give the administrator a call and ask what the procedure is to put the account in your name, assuming yuo are the named beneficiary. They will most likely require some forms filled out plus a copy of the death certificate. Same thing with any other accounts she may hav had, including insurance policies, and also any joint accounts that need to be retitled - joint savings and/or checking, and joint ownership of your house or cars are pretty typical. Depending on how many accounts are involved you may find you need 10-15 copies of the death certificate to take care of them all.

Thank you, you are right. I did just that, filed extensions. Ordered 12 Certificates may have a left over or two. Def a lot to do.

AtlantaTaxExpert · Apr 11, 2014, 04:15 PM

My condolences as well. All advice given is valid, especially from ebaines.

catonsville · May 19, 2014, 10:09 PM

Update:
I read that I can disclaim my wife's IRA Annuity and let it go to my 3 children (adults), as they are listed as next in line to the annuity. Would that be a good idea? My thinking is that it would lessen my tax burden and also help me to pass on this tax advantaged money to them.

AtlantaTaxExpert · May 20, 2014, 05:23 AM

Disclaiming the IRA and allowing it to pass to your children US an option, but we would need to your entire financial situation as a whole to judge whether it was a good idea or not.

You need to speak with an experienced tax professional face-to-face about this issue.

ebaines · May 20, 2014, 05:50 AM

There are a few differences in how an inherited IRA must be handled, depending on who the beneficiary(ies) is (are). When a spouse inherits an IRA it's as if that IRA belonged to him/her all along, in that the account can go on essentially idle until you decide to take distributions - subject of course to the required minimum distribution rule that kicks in at age 70-1/2. But if the person who inherits the IRA is not the original owner's spouse (for example the children), then they are required to start taking distributions by December 31 of the year following the decedant's death, and of course must pay taxes on those distributions. However, since this is an annuity the company may have rules around whether these distributions can be made prior to the annuity having come of age - there may be penalties involved for what thety would consider early distributions. I suggest you talk to the company that has the annuity and see what rules apply regarding mandatory distributions from the account.

By the way, it's too late now but I must point out that annuities are not a verfy good investment in general, and are particularly poor as an investment in an IRA. The one benefit of an annuity is tax-deferred growth, but an IRA is already tax-deferred, so by buying an annuity in an IRA account you are wasting the primary benefit of the IRA. It's much better to buy an annuity as a regular investment and use the IRA for investments that would otherwise not be tax-deferred.

catonsville · May 20, 2014, 08:55 AM

Originally Posted by ebaines

There are a few differences in how an inherited IRA must be handled, depending on who the beneficiary(ies) is (are). When a spouse inherits an IRA it's as if that IRA belonged to him/her all along, in that the account can go on essentially idle until you decide to take distributions - subject of course to the required minimum distribution rule that kicks in at age 70-1/2. But if the person who inherits the IRA is not the original owner's spouse (for example the children), then they are required to start taking distributions by December 31 of the year following the decedant's death, and of course must pay taxes on those distributions. However, since this is an annuity the company may have rules around whether these distributions can be made prior to the annuity having come of age - there may be penalties involved for what thety would consider early distributions. I suggest you talk to the company that has the annuity and see what rules apply regarding mandatory distributions from the account.

By the way, it's too late now but I must point out that annuities are not a verfy good investment in general, and are particularly poor as an investment in an IRA. The one benefit of an annuity is tax-deferred growth, but an IRA is already tax-deferred, so by buying an annuity in an IRA account you are wasting the primary benefit of the IRA. It's much better to buy an annuity as a regular investment and use the IRA for investments that would otherwise not be tax-deferred.

You are right, but hind sight is 20/20. It started at 100K in 09 I think, and is now sitting at 128K. Not to bad, better than a CD. Did not touch it for RMD, had other money to cover the RMD.

PS The person who talked us into setting it up, screwed up our tax return the next year, and is now history.