When the owner of an annuity dies, how long must the proceeds from the annuity be distributed if there is no non-spouse beneficiary selecting a lifetime income option?

In the context of annuity contracts, when the owner passes away and there is no non-spouse beneficiary who has selected a lifetime income option, the IRS guidelines require that the proceeds from the annuity be distributed within a specific timeframe. The correct answer, which indicates a 10-year period, aligns with the regulations established under the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

Under the SECURE Act, if a designated beneficiary is not a spouse and does not opt for a lifetime income option, the entire value of the account must be distributed within 10 years of the account owner's death. This rule is designed to prevent the perpetuation of tax-deferred accounts indefinitely and ensures that the benefits are realized within a reasonable timeframe.

Choosing 10 years reflects an understanding of current regulatory frameworks that have aimed to balance tax benefits for beneficiaries with the need for timely distribution of assets. Thus, understanding the timeline for distributions is crucial for compliance with tax regulations and for ensuring the beneficiaries can plan their finances accordingly.