Market Recovery Program
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Chapter 13
DEATH BENEFIT
What happens to the funds in the Indexed Annuity with Income Rider at death?
If the owner is married and his/her spouse is the beneficiary of the investment and:
1) the owner dies before turning on the income stream, the investment passes to the surviving spouse who then treats it as if he/she were the original owner.
…or…
2) the owner dies after turning on the income stream, the investment passes to the surviving spouse who then has the right to continue drawing annual payments from the Income Account but only until the amount in the Income Account Value is exhausted; the surviving spouse in this instance does not get to receive annual payments for his/her lifetime. [1]
For example: let’s suppose our friend Joe has, as he had planned, turned on his income stream at age 70, had received 3 annual payouts of $31,321.63, and then died at age 72. A total of $93,964.89 had therefore been paid out to him. The Income Account Value of $522,027.20 would be reduced by $93,964.89, leaving $428,062.31 from which Joe’s surviving spouse could draw upon each year.
What if Joe is unmarried or provides for a beneficiary other than his wife?
The Income Rider and its benefits cannot be transferred to non-spouse beneficiaries.
Non-spouse beneficiaries would receive the value of the underlying investment, the Indexed Annuity, whatever it was at the time of death. There are also different rules for distributing the funds from an inherited annuity. [2]
[1] The remaining Income Account Value will continue in a series of payments of up to 6% of the account’s value, based on the surviving spouse’s age at the date of the step-in, until the balance is depleted. See: Appendix C -- Guaranteed Income percentages. Note this rule is particular to the product used for illustration purposes.
[2] See under the heading “Taxation” in Appendix E -- Annuity features, in general.
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