Inheritated Non-Qualified Annuity

[KC-CPA]

Husband and wife are beneficiaries of a non-qualified annuity. Are there any mechanisms to roll their respective proceeds into a decedent IRA and defer the taxes?

I have never had this question but they are telling me they can do this. I refrain from answering annuity questions like this right away as nothing ever seems to be straight forward with them.

[appelman]

I'm fairly certain that you cannot convert it to an IRA.

And that will be true even if it is "inheritated." I can't lay hands on a primary citation, but here are a couple of secondary references:

http://wiki.fool.com/Tax_Rules_for_an_Inherited_Non-Qualified_Annuity

http://www.livestrong.com/article/121017-transfer-annuity-ira/

[Jiggers]

I would agree, this is a non-qualified plan. You can't rollover a non-qualified to a qualified plan (IRA).

[Burke]

Absolutely correct. The term "non-qualified" means it is not an IRA, 401K, or any of those plans. It is simply a tax-deferred annuity, purchased with after-tax money, for which they were apparently the beneficiaries. No rollover is allowed. However, the basis would not be taxable income, only the earnings. The company will issue a 1099R for each distribution, and it should reflect the non-taxable basis.