If you are already with Fidelity, they will guide you through it with the only sticking point being the current annuity holder…they want to keep their your money as much as Fidelity wants it.  I say that because the originating firm had an extensive set of paper forms that had to be filled out by hand and they kept rejecting them for minor typos… which meant redoing the 12 or whatever pages and returning to FedEx or UPS to fax the bundle in all over again.

Another PITA:  once the original owner is gone, at least in my case, I became the owner and the contract numbers changed…except I didn’t yet know what those new contract numbers were.  As a result I was no longer able to enter my online accounts or talk to their CSRs.

Another PITA:  accessing the new contracts, either online or via a real person required a seemingly random combination of my parent’s and my personal information (i.e. SSN, birthdate, contract # (new contract number vs. old, etc.). for account access…but they never told me which data they wanted where.

Just some caveats to look out for (i.e. get new contract number before you need it, make sure you can access your online account if you have one, etc.).

The simplest thing, if you don’t need the $ now and especially if you don’t think you’ll ever need it, is a 1035 exchange.  It’s essentially the equivalent of rolling an IRA over; ownership goes from your mother to you with no tax consequences.

Granted, for most people in most circumstances annuities are not a good choice, but you now (involuntarily) have one and the question is how best to get rid of it.

If Fidelity is like Vanguard, they have a suite of their mutual funds and/or ETFs (can’t remember which) that you can invest in.

The second best option IMO is to spread payments out over a long enough period that they don’t materially affect your tax situation (i.e. bump you up a bracket or otherwise affect things like scholarships, etc.).

Qualified = the annuity is funded with pre-tax $ and non-qualified = after-tax $.

In the case of the annuities I inherited, the split between original investment and earnings was available through online account access.

Also, in my case the way the beneficiary (me) was designated, I was not eligible for a 1035 and had to empty them within a 5-year period but since they overlapped by two years) I really had 7 years to get rid of two annuities each with 6-figure taxable portions which, as you stated, really hurt tax wise.

The annuity and the IRA are two separate entities.  You cannot add any funds to the IRA nor can it be rolled into (one of) your existing IRA(s); it remains a separate and distinct inherited IRA and, thanks to the democrats in congress you must empty it within 10 years.

You can withdraw the money however you like, but chances are (by design) you are at or near your peak income (and therefore marginal tax rate) so the libs want you to withdraw your $ and pay taxes on it now (rather than later the way it used to be).

Fidelity will walk you through it all.

I’m not sure what you are looking at when calculating the cost of doing the 1035 exchange; basically rolling your mother’s annuity tax free into an annuity in your name.

You might want to talk to Fidelity or Vanguard:  I am mostly at Vanguard and when I researched their annuity options you basically transfer the money (no fees) into an annuity in your name and can then invest it in various (not all, but enough) Vanguard ETFs or mutual funds (can’t remember which).

IOW not a fixed 3% return but market-type returns (+ or -).

With respect to tax rates:  unless congress votes to extend Trump’s tax cuts/rates (as if), tax rates will revert to pre-Trump (or worse) rates next year.