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Variable Annuity Help
Old 05-13-2006, 02:46 PM   #1
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Join Date: Mar 2006
Location: Houston
Posts: 4,337
Variable Annuity Help

For those that remember my posts, you're well aware that I am one of the non-believers in annuity products. The following is one of my key reasons. I am looking for some help from some of the investment, legal and/or accounting professionals that frequent this board.

Here goes.................

My non-financially savvy father walked into a bank one day in the early 90's and asked what he should do with his life savings that he didn't think he needed to live on but wanted to leave to his children. It was about $100K. He left with a variable annuity. When he told my oldest sister she went nuts. Even she knew what a disaster it was. Unfortunately, the deed was done. There was no getting the money back until all of the terms of the annuity are met.

He passed away in 2004. That was the first requirement. The second requirement is that the surviving oldest sibling (my brother) be 59 1/2. God only knows where that came from! Should my older brother pass away before he reaches 59 1/2, then the annuity would be held until the next sibling (me) reaches 59 1/2.

When the annuity pays out it is to be divided equally amongst the survivng siblings. Currently, we are all still alive but my youngest brother is not doing so well so that my affect the payout. The 5 way split right now is about $35K each (yes, the return sucks). The payment is supposedly to be made to my youngest sister who would distribute the proceeds to the survivng heirs.

Here are the questions.

1. Is this a taxable event to my youngest sister who would pay all of our taxes and distribute the tax free remainder to the others or do we all get individual 1099s (or equivalent) from the annuity company?

2. Should my younger brother pass away, do his heirs have any claim to his share or would they depend on the generosity of his siblings?

FYI -- the annuity company is very difficult to deal with. They won't send anyone a full copy of the annuity contract. If my father had one, it's lost.

The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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