Advanced Underwriting Consultants

Question of the Day – November 1

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My client is the beneficiary of a non-qualified deferred annuity (NQDA) inherited from her mother in 2008.  The client has not yet taken any distributions from the inherited account.  What are her RMD obligations?

Answer:  The non-spouse beneficiary of an NQDA generally has two options for taking distributions from the inherited account.  The first is that the beneficiary may take annual distributions based on the beneficiary’s life expectancy beginning in the year after the original owner died.

If that method is not chosen, the beneficiary must take a complete distribution of the account before the end of the fifth year after the original owner’s death.

It appears that the IRS will allow a tax-free transfer of an inherited NQDA to another NQDA account.  However, the new account is still subject to the RMD rules described above.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.