1035 for Inherited Annuity

[rats0001]

I can no longer stand dealing with Transamerica with my inherited annuity. I know I can do 1035 exchange in theory, However I can not find a company that will accept a 1035 because I'm taking stretch payments.

Does any know of a company that will do a 1035 for a case like this, for a contract valued at 42K.

Thanks.

 

[rats0001]

I guess this type of 1035 is only available in theory.

 

[scagnt83]

@Allen Trent might be able to shed some light on this from a regulatory standpoint. He sees some of the behind the scenes stuff at his carrier.

I know the IRS issued a private letter ruling about this about 8 or so years ago. Some carriers started accepting them after that. However, a PLR is not a firm ruling or guidance. It is specific to an individual case. So to my knowledge, it is still a grey area.

The issue likely is that you have already started RMDs. It just makes for more liability on the receiving carrier.

@Tahoe Ray might know of some carriers that will accept it.

I personally do not have experience with the situation.

 

[Allen Trent]

@Allen Trent might be able to shed some light on this from a regulatory standpoint. He sees some of the behind the scenes stuff at his carrier.

I know the IRS issued a private letter ruling about this about 8 or so years ago. Some carriers started accepting them after that. However, a PLR is not a firm ruling or guidance. It is specific to an individual case. So to my knowledge, it is still a grey area.

The issue likely is that you have already started RMDs. It just makes for more liability on the receiving carrier.

@Tahoe Ray might know of some carriers that will accept it.

I personally do not have experience with the situation.

I personally have an inherited NQ Annuity with Lincoln that my mom owned that I receive the RMDs from. However, I would be shocked that any carrier woukd take on the responsibility to issue new contract with all the corresponding risk of doing those calculations on a 1035. It would require them to get accurate cost basis information, interpret the IRS codes for NQ based on original issue ages/dates of original contract as to what versions of the law applies & finally to calculate the RMD based on parties to the contract. Then, will the new carrier even allow the free withdrawals for the RMDs as they may exceed interest or 10% free withdrawals. Most NQ annuities don't have the free WD for RMD as they do with Qualified Annuity. RMDs on a NQ annuity are such a super small fraction of policies & most carriers don't even allow them on death claims, let alone new business.

What is the current cost basis? It is possible if you have been taking inherited RMDs from it for awhile that you have most of the taxable gains already out of the policy, so you could just surrender the contract & no need to even be bothered by finding the unicorn carrier & no longer need RMDs anymore. 10% penalty prior to 59 1/2 won't be an issue at surrender as it will be coded as a death claim just like your annual 1099s right now should be showing as death claim not early distribution

 

[scagnt83]

I assumed it as a stretch IRA under the old rules.

 

[Allen Trent]

I assumed it as a stretch IRA under the old rules.

Because he mentioned 1035, a few times & never mentioned it was an IRA, I assumed it is NQ.

If it is an inherited IRA, most all carriers & custodians can handle setting up a new inherited IRA as a transfer or direct rollover