• Non-Qualified Annuities: Some companies allow non-qualified annuity beneficiaries to defer paying taxes on annuity death benefits by "stretching" their beneficial interests within five years or over their life expectancies, either from the original contract or through a tax-free exchange to a more competitive immediate annuity. A surviving spouse can also elect to continue the annuity contract in his or her name.
• Qualified Annuities: Tax-qualified annuities are those purchased through a qualified plan such as an IRA, Keogh plan, 401(k) plan, SEP (simplified employee pension), or some other retirement plan. Participants must start taking "required minimum distributions" (RMDs) from retirement accounts by age 70 1/2.

  If the owner/annuitant dies before RMDs have begun, the beneficiary may "stretch" a qualified annuity (deferring paying taxes on the money) by putting off taking the money for five years or having it paid over his or her life expectancy.

  If the owner/annuitant dies after RMDs have begun, the beneficiary can take the balance of his or her beneficial interest over his or her life expectancy or the owner's life expectancy, whichever is longer.

  A surviving spouse has another option unavailable to other beneficiaries. he or she can re-title the annuity in his or her name, continuing the contract, withdrawing money from the contact or arranging income payments. This amounts to an IRA Rollover.

When either type of annuity contract is under a settlement option, withdrawals beyond the scheduled payments are not allowed, nor may the contract be surrendered.