1099-R---Death of Spouse

[DaveO]

A direct "rollover" of an annuity is a Section 1035 exchange with a code of 6 in box 7. Any time you cash out an annuity it is taxable no matter what you do with the money. It is up to the owner of the annuity to figure their basis in a non qualified account. The agent should provide the required numbers.

[Burke]

You are correct in that you can do a 1035 exchange from one annuity to another annuity as long as you are the annuitant on both contracts, and it is done properly with you taking no possession of the proceeds. You cannot do one from a spouse to the other spouse. This was apparently paid out to the wife who was a named beneficiary on the contract of the annuitant who died.

[taxea]

Thanks so much!!! It was rolled over into another annuity.

Make sure there is documentation of the rollover and that it was done correctly or you may still have a taxable/not taxable issue.

If it was rolled over why is there no G designation?

[Bees Knees]

You cannot do one from a spouse to the other spouse. This was apparently paid out to the wife who was a named beneficiary on the contract of the annuitant who died.

You can roll it over if the spouses were joint owners of the annuity. The OP does not clarify this.

[Burke]

Make sure there is documentation of the rollover and that it was done correctly or you may still have a taxable/not taxable issue. If it was rolled over why is there no G designation?

Because it was paid out to the beneficiary and she took possession of the funds. Then bought herself another annuity. And it was not an IRA.

[ChEAr$]

You can roll it over if the spouses were joint owners of the annuity. The OP does not clarify this.

I think it was clarified from the beginning, since the widow got the 1099R with a 4 in block 7.
If it had been jointly owned a 1099R would not have been issued.

In fact, I am not sure what Bees says holds water, about a joint ownership of an annuity. Are they, like all pension plans only available for individuals?

[Dusty2004]

What type of account was it

My question is, I have a 1099-R for a widow, with 4 as the distribution code and and amount of the distribution and the taxable amount. My first question, was is the taxable amount a death benefit (non-taxable) and was since told that she would NOT have received that form if it were not taxable. I spoke with the investment counselor today and he said "it was underwater, really made no money but doesn't know original cost basis" then went on to explain that this was a "death benefit from a non qualified anuity" and he didn't know if that was taxable or not. The amount was rolled directly into another annuity in the spouse's name. Is the 'taxable' amount on the 1099-R really taxable to the widow?

What type of account was it? An annuity? An IRA? A Pension?

What type of account was it rolled into?

An IRA rolled into an annuity would be taxable, etc.

Dusty

[Super Mom]

What type of account was it? An annuity? An IRA? A Pension?

What type of account was it rolled into?

An IRA rolled into an annuity would be taxable, etc.

Dusty

It was an annuity, rolled over to an annuity. Obviously, the investment person should have done a 1035 and didn't. Do I ask him to change it?

[oceanlovin'ea]

sounds to me like this could have been some kind of life insurance distribution or an annuity perhaps. I say this because you mention the gross amount, taxable amount and premiums paid.

An IRA would not have premiums paid. So you might need to look into this further as to what it actually is.

Linda, EA

[Super Mom]

You are correct in that you can do a 1035 exchange from one annuity to another annuity as long as you are the annuitant on both contracts, and it is done properly with you taking no possession of the proceeds. You cannot do one from a spouse to the other spouse. This was apparently paid out to the wife who was a named beneficiary on the contract of the annuitant who died.

Ok, thanks for all of your help. Assuming this wasn't joint, no 1035 could be done, thus a 1099-R, any way around the tax? Burke, I think your getting this, for anyone else, this is not an IRA it is a non-qualified annuity from an insurance company. Thanks!

[Super Mom]

Ok, it would seem that the fact this is NOT an IRA, and a 1099-R was issued with code 4, this is a non-qualified annuity from a life insurance policy, and would seem this is taxable. However, I REALLY want to help this widow as much as possible, any suggestions on what to do, I believe the investment person will cooperate with me. Thanks for all of the help!!!!!!!!!!

[oceanlovin'ea]

don't think it can be changed. But like someone else said for it to be a 1035 it would have to have been the same person transferring the annuity. She got it because he died.

IF they had withheld some FIT, that would have helped her now. But I think it is taxable and will just have to be added to her income.

Is there a way they can itemize? That would reduce taxable income.

Linda, EA

[Burke]

Ok, it would seem that the fact this is NOT an IRA, and a 1099-R was issued with code 4, this is a non-qualified annuity from a life insurance policy, and would seem this is taxable. However, I REALLY want to help this widow as much as possible, any suggestions on what to do, I believe the investment person will cooperate with me. Thanks for all of the help!!!!!!!!!!

There is nothing anyone can do at this point, including the investment person, or agent or whatever he is. If he handled the claim for the proceeds with the insurance company, he should have known of the tax ramifications, advised her, and had income taxes withheld on the distribution. The company also should have inquired whether to withhold taxes, and probably did. It's right on the form she would have signed. She can still file MFJ, probably can get exception from penalties with 2210, but there are no magic bullets that will make this go away. And although it is paid out from a life insurance company, it is not a life insurance policy. It is (or was) an annuity contract.

[Burke]

I think it was clarified from the beginning, since the widow got the 1099R with a 4 in block 7.
If it had been jointly owned a 1099R would not have been issued.

In fact, I am not sure what Bees says holds water, about a joint ownership of an annuity. Are they, like all pension plans only available for individuals?

There is such a thing as a Joint Survivorship annuity. When the first annuitant (usually a spouse, I have never seen another relationship in this type) dies, the other named annuitant gets the remaining payments under the terms of the contract. And no 1099R would have been issued. But this could not be a vehicle for an IRA, since they have to be separate accounts.

[Super Mom]

don't think it can be changed. But like someone else said for it to be a 1035 it would have to have been the same person transferring the annuity. She got it because he died.

IF they had withheld some FIT, that would have helped her now. But I think it is taxable and will just have to be added to her income.

Is there a way they can itemize? That would reduce taxable income.

Linda, EA

other than the obvious savings from itemizing, is there anything special to this transaction she can show, yes she's itemizing.