What happens when a spouse inherits an annuity?

What happens when a spouse inherits an annuity?

A spouse can choose to change the annuity contract into their name, assuming all rules and rights to the initial agreement and delaying immediate tax consequences. They will have the ability to collect all remaining payments and any death benefits and choose beneficiaries. The spouse then becomes the new annuitant.

Can a spouse inherit an annuity?

Tax rules for inherited annuities If you’re the spouse of the original annuitant, then you can choose to continue receive payments according to the annuity schedule. There are four ways to take money from an inherited annuity: Lump sum: You could opt to take any money remaining in an inherited annuity in one lump sum.

Is an annuity marital property?

Annuities as Marital Property: Divorce Settlement Laws When annuities remain with their original owner, splitting them is unnecessary. However, if both parties paid annuity premiums while married, the annuity is typically split. Some annuities are owned jointly between spouses, while others are individually owned.

How do you avoid taxes on an inherited annuity?

The Surviving Spouse If a surviving spouse recently inherited an annuity, they can either pay taxes on all of the funds now, spread the tax payment over time, or exercise the spousal continuation provision. Spousal continuation is the tax strategy to avoid paying taxes now.

How are annuities treated in divorce?

The most common disposition of an annuity in divorce proceedings is to split the annuity in half. This is typically executed by withdrawing half of the account value and giving it to one of the spouses.

How much of an inherited annuity is taxable?

Depending on the type of annuity, the tax will have to be paid on the lump sum received or on the regular fixed payments. The payments received from an annuity are treated as ordinary income, which could be as high as a 37% marginal tax rate depending on your tax bracket.