What is Spousal Continuation?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

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:

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:

Conclusion

Spousal continuation provisions can vary based on the annuity type and the insurer’s policies. Some annuities automatically include this feature, while others may require it to be selected as an option when the annuity is purchased. For further help determining if you should use spousal continuation in your annuity, contact us for free advice.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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