Annuities supplement retirement income by deferring taxes on earning and adding distributions to gross income. There are four designated parties to any annuity contract: the annuitant, the owner, the insurance company and the beneficiary. The insurance company is the seller of the annuity and promises to pay lifetime and death benefits. Beneficiaries receive death benefits. The owner and annuitant are often confused. The owner is the person buying the annuity to pay benefits on the annuitant's life. The owner is responsible for tax considerations while payments are based on the age and date of death of the annuitant. Annuity owners can be changed.
Pick a new owner. Options include a spouse, child or even a charity. Get the new owner's legal name, date of birth and Social Security number.
Call the insurance company at the customer service number located on the annuity contract. Request an "Annuity Change of Ownership Form," or a similarly titled form.
Fill out the form with the original owner's information, being careful to not have any typos, use the full legal name and double check contract and Social Security numbers to make sure nothing was transposed. Fill out the new owner's information.
Sign and submit the form.
Warnings
Consult a tax professional regarding the ownership change. The existing owner may have to pay taxes for gifting an annuity over the annual gift allotment or for selling the annuity.
Changing the owner to a charity can reduce the amount of taxes owed in the estate. When donating the annuity to a charity, the annuitant retains living benefits, gets a tax deduction for the donation and the charity often becomes the beneficiary as well, receiving the death benefits.
You can not change the annuitant on the contract, thus the living and death benefits are still based on the annuitant's life.
References
- U.S. Securities and Exchange Commission: Annuities
- Internal Revenue Service. "Publication 575 (2019), Pension and Annuity Income." Accessed Oct. 12, 2020.
- CNN Money. "Before Choosing an Annuity, Know the Tax Implications." Accessed Oct. 12, 2020.
- Internal Revenue Service. "Employee Benefit Plans: Explanation No. 3, Joint and Survivor Determination of Qualification," Page 2. Accessed Oct. 12, 2020.
Warnings
- Consult a tax professional regarding the ownership change. The existing owner may have to pay taxes for gifting an annuity over the annual gift allotment or for selling the annuity.
- Changing the owner to a charity can reduce the amount of taxes owed in the estate. When donating the annuity to a charity, the annuitant retains living benefits, gets a tax deduction for the donation and the charity often becomes the beneficiary as well, receiving the death benefits.
- You can not change the annuitant on the contract, thus the living and death benefits are still based on the annuitant's life.
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With more than 15 years of professional writing experience, Kimberlee finds it fun to take technical mumbo-jumbo and make it fun! Her first career was in financial services and insurance.