A non-qualified annuity is an annuity account funded with income that has already been taxed. When a person purchases an annuity, the payout of that annuity is based upon the lifetime of the annuitant, not the life of the original owner of the annuity. So you can change the owner of a non-qualified annuity at any time.
The purpose of an annuity is to save money for the future by making contributions to the account over time, and later receiving scheduled payouts. Unlike retirement accounts, which might be offered through an employer, a non-qualified annuity must be opened by an individual directly through the financial institution that handles the funds. The money that you contribute to a non-qualified annuity cannot be deducted on your taxes, making it in that regard much like a standard savings account.
The person who sets up an annuity becomes the annuity owner. This person is usually the one who contributes to the annuity. The annuity owner has complete control over the money in the annuity account as long as he lives, but the distributions from the account are not necessarily based upon the lifespan of the owner. The distributions are based upon the lifespan of the person named as the annuitant.
When an annuity owner sets up an annuity through a financial institution, that owner must name an annuitant. The lifespan of this annuitant is the basis for the annuity payouts. For example, if a parent purchases an annuity with a child as the annuitant, the parent is the annuity owner, but the payout schedule is based on the lifespan of the child. Because a child generally lives longer than the parent, each annuity payout will be smaller, and the payouts will continue for longer.
You can change the owner of an annuity only before the death of the original owner. If that owner dies before the annuity begins to pay out, the annuity contract is no longer valid and the annuitant must withdraw all funds from the account within five years, paying taxes on any gains. However, if the owner of the account dies after the annuity schedule begins, the annuitant will continue to receive payouts on the prearranged schedule. You can change the owner of the non-qualified annuity by filling out a change-of-ownership form through the financial institution that handles the annuity.
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