Joint Ownership Issues
As stated before, required minimum distributions must begin at the death of any owner which means that when the first joint owner dies, the annuity must begin making distributions. The only exception is if the surviving spouse was named beneficiary, they could continue the annuity without current distributions. There is no real benefit to joint ownership as it does not extend the life of the annuity and it can be a detriment to continuing the annuity when the first owner dies.
Many individuals believe that since they own their other property jointly, they should also own their annuity jointly. The better way to go would be to have each spouse name their spouse the beneficiary rather than making both spouses co-owners. Naming the spouse as beneficiary would allow a better tax outcome.
Parent-Child Joint Ownership
If a parent purchases a joint annuity with their child, the parent and child will own equal shares. A withdrawal requires two signatures and distributions are made out to both parent and child. If the parent paid the premium, they have just made a gift to their child of half the value of the annuity. If the parent wants to make a withdrawal, one half the distribution will be taxable to the child regardless of who receives the money. If the child is under age 59 ½ then the entire amount distributed is subject to a 10% penalty.
If the parent owns the annuity jointly with a child or grandchild, making the child the co-owner makes no real difference in postponing distributions. If the child dies before the parent, the parent would be forced to begin liquidating the annuity even if they had supplied the money.
The Bottom Line
In most cases, using joint ownership only hurts the ability to sustain tax-deferred growth. Most owners think joint ownership will allow the annuity to continue until the second death and that they will obtain additional tax-deferred growth. In actuality, it is just the opposite. When the first owner dies it can trigger the required minimum distributions.