Dad's variable annuity after death

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
NAD83
Posts: 105
Joined: Thu Apr 07, 2011 1:25 pm

Dad's variable annuity after death

Post by NAD83 » Thu Sep 13, 2018 2:04 pm

My dad passed away recently. He had two Jackson variable annuities. I understand the options that can be done with these (I think.) The easiest would be a spousal transfer to my mom (his widow.) I don't see any need to keep these products. She doesn't need another stream of income, as her pension and SS easily cover her modest living expenses. She'd like to simplify things. And she has no idea what these products are.

Details of the annuities:

1. Jackson National Perspective L Series VA
Qualified (IRA); Issued 10/2010
Optional Benefit: Lifeguard Freedom 6
Guaranteed withdrawal balance: $48,767
Percent of balance avail. for withdrawal: 5%
Guaranteed annual withdrawal amount: $2,625
Benefit Determination baseline: $52,514
Guaranteed withdrawal balance bonus base $52,514
Death Benefit Value: $48,999
Current Value: $48,999
Surrender charge amount: $0
RMD has been taken for this year

2. Jackson National Perspective L Series VA
Non-tax qualified; Issued 07/2011
Optional benefit: Lifeguard freedom flex (6% bonus with quarterly step-ups)
Remaining guaranteed withdrawal balance: $78,983
Percent of guaranteed withdrawal balance aval. for withdrawal: 6%
Guaranteed annual withdrawal amount: Not yet established
Benefit determination baseline: $68,949
Guaranteed withdrawal balance bonus base: $68,949
Death Benefit Value: $73,449
Current Value: $73,449
Surrender charge amount: $1,794
Basis value (total deposits): $63,300

My plan:
1. Simply transfer the tax qualified one to a new IRA in mom's name at Vanguard; invest in appropriate fund(s). She already has a small taxable account with Vanguard. She does not have an IRA of her own.

2. Get death benefit of non-qualified VA. Put this into her taxable account at Vanguard. From what I understand, she would have to pay taxes on the earnings of this variable annuity. Approx. $10,000. At her normal income tax rate. Which is low--probably 10% I think. The other thing I'm not sure about is the surrender charge amount on this one. Will that be deducted? It doesn't seem to indicate that as the death benefit amount is same as current value. I could not find this in the prospectus.

Thanks for looking at this and answering my questions...or proposing more.

User avatar
grabiner
Advisory Board
Posts: 22907
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Dad's variable annuity after death

Post by grabiner » Thu Sep 13, 2018 7:57 pm

If you don't need the variable annuity, it makes sense to get rid of it and select a lower-cost investment, rather than planning to annuitize it.

Check with the annuity provider whether the surrender change is waived upon the death of the holder. If it isn't, you might wait a few months for the charge to go away, but waiting a long time will cost you more in higher fees than you will save in the reduced surrender charge.
Wiki David Grabiner

User avatar
FiveK
Posts: 5735
Joined: Sun Mar 16, 2014 2:43 pm

Re: Dad's variable annuity after death

Post by FiveK » Thu Sep 13, 2018 8:29 pm

NAD83, condolences for your dad and well done to understand what you have described, even without fully understanding the surrender charge. Variable annuity contracts are notoriously opaque.

Can't improve on your plan together with grabiner's suggestion regarding the surrender fee. Good luck!

Post Reply