Under a Qualified Fixed Annuity

• If death occurs before required minimum distributions have begun, the entire contract must be distributed within five years of the owner's death, or be annuitized over a time period not to exceed the new owner's life expectancy, as long as payments start within a year of the original owner's death. The new owner will be taxed upon surrender or annuitization as the original owner would have been taxed, except that if the annuity is surrendered, the distribution won't be subject to the 10 percent penalty tax.
• If a death occurs after required minimum distributions have begun, any remaining annuity payments must be distributed to the beneficiary over the longer of the beneficiary's or owner's life expectancy (had he or she lived).
• If the owner's only beneficiary is a young surviving spouse, the spouse can elect to have the annuity treated as if he or she was the owner, since a longer life expectancy extends annuity payments.

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