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changing investments post 72T distributions

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ByKathy

L1: changing investments post 72T distributionsScenario:50 year old buys 2 Non-Qualified Annuities in Dec 2002 and begins 72T distributions as soon as able.Is now 56 anddue to market concerns wants to get out of the (AIG) annuities and intoa non-annuity vehicle.Does anyone knowwhether he is required to 1035 to another NQ annuity or whether there is an invesmtent vehicle choice as long as he continues the 72T SEPP distriubtions?2008-09-18 15:08, By: Kathy, IP: [65.104.117.77]
L2: changing investments post 72T distributionsIf the current annuities are non-qualified, you are operating under 72(q) and not 72(t).Only option is a 1035 exchange to another annuity. If the money is at AIG (it may very well be safe)it could also take a long time to transfer.2008-09-18 15:16, By: Gfw, IP: [98.214.144.242]

L2: changing investments post 72T distributionsClient is understandablynervous about AIG and wants out. Wanted to transfer funds to a non-annuity and continue SEPPs there. Didn”t think it was an option but always good to check.Thanks2008-09-18 15:32, By: Kathy, IP: [65.104.117.77]

L2: changing investments post 72T distributionsKathy:I had the same concern for my clients with VA”ssponsored byacompany which is a subsidary of AIG, and there are several such companies. My question was, does AIG the holding company have the ability to “drill down” into their subsidary companies to get assets for use by the parent company, AIG. Frankly, I don”t know the answer to this from a legal standpoint since I”m not an attorney and can”t render legal opinions. However, there are a few facts that every agent / rep has to know when dealing with annuities, both fixed and VA.1. All assets in a fixed annuity are assets of the company that issued it.2. Only fixed assets, like cash and company sponsored money market funds, within a VA are assets of the issuing company. The other investments are called “separate accounts” for a reason … they are NOT assets of the company and thus are not subject to claims against the company.You didn”t specify whether your client has a fixed or variable annuity. If it”s a VA then the drop in market value will cause a significant loss in death benefit if you change to another annuity. There may be other benefits on the current annuity that will be lost with a 1035 exchange.I would check with the issuing company of your client”s VA and see what they say. You, like me, are probably innundated with “news releases” from the companies we do business with addressing the impact of current market situations on the products they sponsor.Jim2008-09-19 08:24, By: Jim, IP: [70.167.81.119]

L2: changing investments post 72T distributionsThanks Jim,It is a VA with AIG, and although the death benefit is important, both husband and wife are relatively young and loss of principal is their primary concern.The VA was established with immediate SEPPs and because they have been taking regular distributions from the get go, the DB isrelatively in line with the SV/CV than say someone who invested and didn”t touch the funds for the same 6 year period.The bailout of AIG has calmed some fears, but they”re such a multi-tiered financial corporationthere areconcerns as to the soundness of the other subsidiaries, ie funds, securities, BD etc.. 2008-09-19 09:19, By: Kathy, IP: [65.104.117.77]

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