04 Feb I inherited an annuity. How soon do I have to take the money?
Q. My mother died in January 2020 and her four children inherited her nonqualified annuity. I believe the rules are different per the SECURE Act. I rolled my share into a brokerage account in 2020. Do I need to exhaust that account in a certain time frame?
A. We’re sorry to hear about the loss of your mother.
You are correct that the legislation known as the Setting Every Community Up for Retirement Enhancement Act — the SECURE Act — became law in late December 2019 as part of a broader federal package.
The SECURE ACT changed the timing of required distributions on qualified inherited retirement accounts, said Joseph Sarnecki, a certified financial planner with U.S. Financial Services in Fairfield.
He said the good news is that the change did not affect non-qualified annuities.
Therefore, you and your siblings do not need to exhaust the account within the 10-year period that qualified retirement accounts are now required to — for non-spouse beneficiaries, Sarnecki said.
“If you are stating that you rolled your share into a brokerage account, though, it seems as if you already distributed your share of the annuity,” he said. “If that is the case, it will be important to confirm if there were any tax consequences of doing so.”
But he said if the brokerage account is holding your share of the annuity, you are not required to exhaust it over the 10-year period.
“If your mom had any qualified retirement accounts, designated beneficiaries will be required to liquidate the qualified account in full no later than Dec. 31 of the year containing the tenth anniversary of mom’s death, known as ‘the 10-year rule,’” he said. “Annual distributions are not required, therefore, you could take the full amount in year one or year ten, or anything in between.”
There are eligible designated beneficiaries that may elect to receive annual distributions over their life expectancy, Sarnecki said. Eligible designated beneficiaries include the spouse of the deceased, a minor child of the deceased (until the minor attains the age of majority, after which the 10-year rule applies), disabled and chronically ill individuals and beneficiaries not more than 10 years younger than the deceased, he said.
Email your questions to .
This story was originally published on Feb. 4, 2021.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.