disability exemptions

L1: disability exemptionsMy cousin is 37 years old and had been living on social security income disability and medicaid. She received a settlement from a law suit and has lost some medical and income benefits due to this settlement. She is about 400 pounds and diabetic. She took her $350,000 settlement and bought an annuity, advice from her attorney. Now she is told she must 72q or annuitize. Someone told me there was an exception to the 10% penalty for personal injury settlements. I have not found anything to that effect, or exemptions from the penalty for diability. The hope was to postpone annuitization a few years in hopes of a more interest friendly environment. Are there any such exemtions?
Bob C2004-09-25 05:17, By: Bob C, IP: [152.163.100.204]

L2: disability exemptionsHello Bob:
Both 72(q) & 72(t) contain the identical exception from the 10% surtax for reasons of disabilty as defined in 72(m)(7). usually, this means complete & total disability; essentially the same definition as used by the social security administration.
TheBadger
wjstecker@wispertel.net
2004-09-25 08:34, By: TheBadger, IP: [66.250.23.21]

L2: disability exemptionsJust as a follow-up – make sure that you also check with the insurance company or read the annuity contract.
While the IRS may waive the 10% penalty, most annuity contracts do not waive their charges on partial withdrawals.2004-09-25 10:28, By: Gfw, IP: [172.16.1.71]

L2: disability exemptionsGood morning Bob:
To follow-up on Gfw, while it’s true you may face a surrender charge from the annuity company, there are some exceptions you may be able to work with. The Rep / Agent who sold the annuity should be able to explain all of these factors for her particular contract.
The first thing to check is the time of the surrender period. If your cousin has a “variable” annuity, the surrender period may be anything from 10 to 12, years to zero (0) years. Typically it is 7 years with many newer ones using 3 years or 0 years. If it’s a “fixed” annuity, look for 5 to 17 years surrender period.
The second thing to look for is how much money she can get each year”penalty-free” from the annuity.Both typesare typically 10%, but some vary from this norm. Also, some are 10% of the intital amount invested and some are 10% of the net amount invested. Check the contract.
The thirditem is to review the contract for exceptions to the surrender charge schedule. Some have exceptions such as disability.
The fourth item is called the “free look period,” which all contracts have. Typically this period is 10 to 30 days, during which time you may return the contract for a refund. This period starts when your cousin received the contract, not when it was issued. So if you are within this time frame and the terms of the contract won’t work for her situation, then return the contract and start over. This is driven by each state’s laws and should be written on the cover page or one of the first few pages of the contract.
The Rep / Agentwho sold theannuityshould be able to explain all of these factors foryour cousin’sparticular contract. Don’t delay checking these things out.
Good luck.
Jim2004-09-27 09:07, By: Jim, IP: [68.1.157.228]