Inherited Annunity

[Golfer68]

I just inherited an annuity from my grandma.  I believe the contributions were made pretax.  Am I right that my two options are:

1) take as a lump sum and pay income tax on full amount

2) Roll over into an inherited IRA and begin to take RMDs next year

There are no other reasonable options correct?

[jfoxcpacfp]

You cannot r/o an inherited annuity from your grandma into an inherited IRA. You are required to distribute the balance over a period of 5 or fewer years. You may have the ability to stretch payments out over your lifetime but I'm not sure if that's available to "qualified" (pre-tax) annuities.

We don't deal with annuities much - maybe one of the insurance guys can confirm the accuracy of my last statement.

[Golfer68]

Sorry, she did not inherit it, it was hers originally ... I am inheriting it

[Faithful Steward]

First, are you sure the annuity was held inside an IRA? Or, could it possibly be a non-qualified annuity? You never made this clear in your original post.