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Is there any situation in which an annuity does NOT gain interest?

I have an annuity -established in 2001 . Part of a divorce settlement and in the form of a Qualified Domestic Relations Order. I was informed at the time that I could leave it as it was- in my husbands name OR I could establish an annuity in my own name. HOWEVER It read- I will NOT gain interest on the annuity regardless of who's name it was in.- I left it in my husbands name - shortly after the divorce I inquired about a loan against it for my daughters education as the regulations regarding loans were limited to hardship-ie. medical-foreclosures-or investment-such as in residential property or education and was told I WAS NOT ELIGIBLE because I was not a payee. However I am referred to in the divorce as just that -alternate payee. I would like to put it into some kind of interest bearing account if I can.

Nov 15, 2013 by Deborah from Wassaic, NY in  |  Flag
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3 votes

Deborah, Is this annuity a part of a retirement plan. When you are talking about loans, it is sounding like a 401(k) hardship loan. It kind of sounds to me like your ex may have a 401(k) that is a group annuity product. That is very different than an individual annuity.

It sounds to me from the sentence you quoted that you will not have ownership interest, not that it will not gain interest; and if I am correct about it being a 401(k), then it won't get interest exactly, rather there will be underlying investments that have potential growth.

In any case, a QDRO trumps everything. It is a court order that cannot be refuted. If you have a QDRO that states you are an alternate payee, then you are an alternate payee.

If it is an individual annuity, you need to document that to the annuity company. Most instances of annuities will have a 10% tax penalty if you withdraw it before age 59 1/2 .

If it is a 401(k), you are likely entitled to your share of the assets as stated in the QDRO. I just don't know what you have. Maybe he had a 401(k) that was rolled into an individual annuity - which would be another set of rules. Either way,a 401(k), an annuity, or an IRA will all have some income taxation on withdrawals, plus if you are not 59 1/2, a 10% penalty.

Please give us some more info so we can direct you better

Comment   |  Flag   |  Nov 15, 2013 from Delray Beach, FL

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Rich Winer Level 20

I agree with both DC and Michael. I suggest you find a local professional to help you understand what you own and to what you are entitled, as an owner and under the terms of your QDRO. Hindsight being 20/20, advice from a financial advisor probably would have been helpful at the time of your divorce. I'm not sure that leaving the annuity in your husband's name was a good idea.

Comment   |  Flag   |  Nov 15, 2013 from Woodland Hills, CA

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I would suggest that you find a local financial professional to meet with to discuss your annuity and what the possible options are.

Comment   |  Flag   |  Nov 15, 2013 from St. Louis, MO

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