Can Changes be Made to Your Annuity After Death?

By |2015-05-22T19:19:46+00:00August 19th, 2013|Annuities|

A recent ruling by the IRS allows for the beneficiary of an annuity (specific case in regards to the PLR) to make changes to an inherited annuity.  Beneficiaries who inherit an annuity may now have options thanks to a recent private letter ruling from the IRS.

Rather than being bound by the terms of the original contract and current tax code, beneficiaries may be able to exchange inherited contracts for newer, higher interest paying contracts, according to the IRS under Private Letter Ruling (PLR) 201330016. This indication of change by the IRS can benefit the beneficiary because newer contracts can have lower costs, higher interest or better features such as policy riders. (income riders)

Prior to the PLR ruling beneficiaries could elect to annuitize the contract within a 12 month period or remove the funds over a 5 year period.  Now many more options could possible exist.

If the PLR results in tax code changes, the beneficiary could use an IRS approved transfer (1035 exchange) and move the funds from one annuity to another without incurring tax liability.  This allows for a wide range of new contracts to be considered and provides for a large array of investment options for the beneficiary.

Traditionally, a PLR is specific to a single question or request but it is not binding.  What it indicates is how the IRS is thinking about a specific topic.  Generally the PLR will lead the way to actual code changes.

This new PLR shows a clear benefit to owning an annuity; it would allow better management of the annuity by the beneficiaries and provide far more planning options.

Here is a link with more information:

About the Author:

Bill Broich
Bill Broich is a well-known annuity expert with over 30 years of experience. He has written hundreds of articles on annuities and other financial topics, and has been a featured commentator on TV, Radio and the Internet. To follow Bill's profile, click here.