What is Spousal Continuation?

What Is Spousal Continuation?

A spousal continuation is a death benefit option for the surviving spouse that allows the beneficiary to assume ownership of the annuity contract preserving tax-deferred growth as long as the contract remains in force.

This provision is critical for widows inheriting qualified annuities (IRA Annuity), and “softens” the tax blow at the time of death.

If this option is selected, the spouse can surrender the annuity contract in the future, take a lump sum of funds, or take a guaranteed income stream.

The Income Rider

If the owner’s spouse is the sole primary beneficiary and elects to continue the policy, the benefits of the income rider (Guaranteed Lifetime Withdrawal Benefit) will also continue, providing the spouse becomes the sole annuitant and sole owner of the policy.

If the spousal beneficiary assumes the policy before any GLWB withdrawals have been taken, the benefit continues in the accumulation period.

Spousal continuation does not restart the withdrawal charge schedule.

Single Owner with a spouse who dies prior to starting income payments:

• If an income rider is chosen, the owner dies, and the spouse is not a joint owner, the surviving spouse can continue the contract, and the total income base will continue to grow during the income base growth period.
• The traditional death benefit for beneficiaries is also an option.

Single Owner who has chosen to receive Single Lifetime withdrawal payments:

• The surviving spouse can choose to continue the contract, including receiving lifetime income payments.
• The death benefit or Guaranteed Lifetime Withdrawal Benefit value will become the new income base at the time of death. Varies by product.
• The income withdrawal amount will be recalculated based upon the surviving spouse’s age at the calculation time.

Single Owner who has chosen to receive Joint Lifetime withdrawal payments:

• The surviving spouse can choose to continue the contract, including receiving lifetime income payments.
• The income base and the income withdrawal amount will remain the same.

Joint Owners that receive Joint Lifetime withdrawal payments:

• The surviving spouse can choose to continue the contract in force, including receiving lifetime income payments.
• The income base and the income withdrawal amount will remain the same.
• This is only available to a joint owner who is the spouse

Do trust-owned annuities qualify for spousal continuation?

Since the annuity contract owner is a trust and not an individual, spousal continuation would not be available.

Also, keep in mind that the general rule is that trust-owned annuities should name the trust as the beneficiary of the annuity and not the annuitant’s spouse.

Annuity Contract Setup:

• The owner and the annuitant must be the same person.
• The spouse must be named as the owner’s sole beneficiary and the annuitant’s sole beneficiary.
• No contingent annuitant and no joint owner should be named.

Related Reading

• Annuitant vs. Beneficiary: What’s The Difference?
• Primary vs. Contingent Beneficiary: What’s the Difference?
• What Happens To A 401K When You Die?
• Inherited Annuities: What Are My Options?
• Annuities that offer a Death Benefit to Beneficiaries
• How To Avoid Paying Taxes On An Inheritance
• The Best Annuity Death Benefits
• Annuity Beneficiaries Inheriting an Annuity at Death
• How to Retire on $200,000 Inheritance
• What is an annuity account, and why should I care?