Individuals who purchase an annuity in Florida agree to pay money to an insurance company in exchange for annual payments in the future. When a variable annuity is the investment vehicle of choice, the payments received by the annuitant in the future are not predetermined. The amount of money received depends on the profits the insurance or investment company receive from the premiums.
Variable annuities, when handled correctly, do not result in tax liability for annuitants when they receive payments. A family law attorney can explain the tax implications of transferring a variable annuity as part of a divorce settlement.
Florida abides by equitable distribution laws regarding property division. The division of a couple’s assets happens fairly and equitably for both parties. This equitable distribution of property may mean that an annuity becomes the sole property of one spouse or the other. Joint ownership of the asset can also continue.
Variable equities are sometimes difficult to divide during a divorce due to tax complications. An incorrect transfer can result in taxes equal to that of normal income. A 10% penalty is also possible. A surrender surcharge may apply to annuities transferred between spouses in a divorce. It may help to split the asset into two separate annuities when owned jointly to avoid any negative tax consequences that arise from a co-owned variable annuity.
Once ownership is clear, the new owner receives any payments that result from the annuity. The new annuity owner can either name a new beneficiary or reallocate the investment. However, the annuity’s current owner is also responsible for any taxes due on annuity payments received.
The division of an annuity, like the property division process as a whole, can become a bit complicated for individuals during a divorce. It is not a simple course of action for a couple who are dissolving their marriage to divide possessions that have both sentimental and financial value to both people. A family law attorney may be the best bet for a person who is getting a divorce to ensure that his or her best interests are considered during the property division process.