Can Surrendered IRA Life Insurance Annuity QCD?

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  • #5034
    Jannie
    Participant

    Rec’d a letter from the Insurance Company where I had the IRA Annuity with (which I surrenders) which refers to this (RMD/QCD) being a RMD Taxable event. I talked to the company before doing this & they said that if it was “surrendered” and went to the Charity (which it did – directly) that it would be a Qualified Charitable Distribution. I’m now confused by their letter & concerned that this is a taxable event to me.
    I’ve used my RMD as a QCD for another IRA & somewhere on my tax software program I put the info & there is no problem.

    Really could use some guidance – as I didn’t wish this surrender of the IRA Life Ins. Annuity to be a taxable event now it appears I made a tax mess.

    #5035
    Jannie
    Participant

    Did more reading – it appears this maybe a non-qualified annuity – IRA Life Annunity? Wow, if that’s correct I really made a mistake. I know there’s no way to correct – I suppose I can take it as an itemized deduction? But that has been raised so high – with only less than a wk. before end of yr.

    #5036
    Alan S.
    Participant

    Yes, if it’s not an IRA the distribution cannot be a QCD. You would have to report the taxable portion of the distribution as shown on the 1099R, and could then itemize the donation providing you have enough total itemized deductions to exceed the standard deduction.

    How could the company rep indicate that a QCD could be made unless it was an IRA annuity, unless they thought you were asking if the donation qualified for a deduction (not a QCD)?

    #5037
    Jannie
    Participant

    I am confused – USAA Life insurance company has it as my Individual Retirement Annuity Contract in my name. The interest (which went into the annuity) wasn’t shown to me as interest income as I didn’t receive a 1099 for my taxes. I did ask about the Qualified Charitable distribution and was assured that if a surrendered the entire amount would be shown as a RMD & it does say in the letter that this satisfies my RMD.
    Thank you for any guidance you can give.

    #5040
    Alan S.
    Participant

    It is likely an IRA, so you should be OK. Sec 408b is actually titled as “Individual Retirement Annuity” which is an IRA with an insurance company invested in an annuity product. The 1099R is not an indication because you would not get a 1099R with either an IRA or a non qualified annuity until you actually took money out of the account. You will get a 1099R for the surrender next month and if the entire contract balance was sent directly to a qualified charity and you are at least 70.5, you would be able to report a QCD on line 4a and 4b of your Form 1040 tax return, like you did before. In other words, you report the QCD yourself as the 1099R will not make any reference to a QCD or an RMD, it will just show the amount distributed.

    If you have multiple IRA accounts, be careful in timing your distributions if you are doing QCDs. To be safe, you should do the QCDs first, not after you have already completed your total RMD for all accounts.

    #5041
    Jannie
    Participant

    ok, another problem – I didn’t realize that I even had this small IRA. I missed it & so… didn’t calculate. I’ll put the question as a different topic.

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