At the Death of the Insured – After Annuitization
If the owner dies after regular distributions from the contract have begun:
- The beneficiary must continue to take distributions at least as rapidly as the rate under the distribution method used at the date of the owner's death.
- In the case of joint owners of contracts issued after April 22, 1987, these distribution requirements are applied at the first death.
If a non-natural entity (other than a qualified trust) is named beneficiary:
- The entire contract must be distributed as a lump-sum during the first year (if permitted by the insurer) or within 5 years of the owner's death.
- Since the beneficiary is not a natural person, the annuitization/settlement options are unavailable. 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.
- Contingent deferred sales charges may apply upon the death of the owner, if the owner is not also the annuitant.
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