At the Death of the Insured, Before Annuitization
If the beneficiary is the surviving spouse:
- In an annuitant-driven contract, the annuity can be continued in force, without a payout, with the surviving spouse as the owner/annuitant.
- In an owner-driven contract where only the owner has died, the surviving spouse could also be named annuitant, but there would be no payout if the owner/non-annuitant was still living.
If the beneficiary is a natural person or trust other than a surviving spouse, and annuity payments have not begun:
- The entire contract must be distributed within 5 years of the owner's death; or
- Annuitized over a 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 federal penalty tax.
- If the owner is not also the annuitant, contingent deferred sales charges may apply when the owner dies.
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