Advanced Underwriting Consultants

Interesting Question

An agent called to ask how the 10% penalty is applied in the case of a joint owned annuity, one owner over 59-1/2, one owner under 59-1/2.  I told him I’ve never seen an IRS ruling on this topic and my impression is it’s matter of how the home office chooses to administer it.  My impression is most companies treat one of the owners (usually the one over 59-1/2) as the “primary” owner and the other owner as a “contingent” owner and send a 1099 out under the SS number of the “primary” owner.  I don’t know if this is legally correct, but that’s the feedback I get from many companies, although I have heard that in rare cases, some companies send out two 1099s, 1/2 to each owner.  In that case, the 10% penalty would apply to one 1099 but not the other.

Larry Owens, JD, CLU, ChFC, MBA, FLMI