Can you keep your annuity after divorce? In many cases, yes — but how it’s handled depends on the contract type, ownership, and how it was funded. At Diversified Insurance Brokers, we help clients nationwide understand what happens to their annuities in divorce, preserve lifetime income benefits, and rebuild long-term retirement security after settlement.

Annuities are designed to create guaranteed income, but during divorce, they become one of the most complex assets to evaluate. Understanding how these contracts are classified, taxed, and divided can mean the difference between keeping your guaranteed income — or losing part of it unnecessarily.

When You Can Keep Your Annuity After Divorce

The first question is whether your annuity is considered marital property or separate property. This depends on when and how it was acquired:

• Purchased Before Marriage: Usually separate property and can typically remain with the original owner.
• Funded with Inherited or Gifted Money: Often considered separate if not mixed with marital assets.
• Purchased During Marriage: May be subject to division or offset through other marital assets.

If your annuity is part of the marital estate, it doesn’t always mean you’ll lose it. Your attorney and advisor can structure asset trade-offs so that you keep your annuity intact while your spouse receives equivalent value elsewhere. This is especially valuable if your annuity includes guaranteed income riders or bonuses that can’t be replicated.

Qualified vs. Non-Qualified Annuities in Divorce

How your annuity is held determines how it can be divided:

• Qualified Annuities (IRAs or 401(k) funds): Divisions must be handled via a Qualified Domestic Relations Order (QDRO) to maintain tax-deferred status and avoid penalties.
• Non-Qualified Annuities: Purchased with after-tax dollars and divided through ownership transfer or asset offsets. If not structured correctly, taxes may apply.

After your decree is finalized, ownership and beneficiary updates are essential. We help ensure your contract remains compliant and aligned with your new financial structure. See our companion guide on how annuities are divided in divorce for more detail on the process.

Protecting Your Lifetime Income Stream

Annuities with guaranteed lifetime withdrawal benefits (GLWBs) or income riders can be especially valuable. Once surrendered or split, these benefits may be lost permanently. That’s why maintaining your annuity — or transitioning it correctly — can preserve thousands in future income value.

• GLWB Riders: May remain active after divorce, depending on contract terms and ownership changes.
• Death Benefits: Update beneficiaries immediately to reflect your post-divorce wishes.
• Joint-Life Riders: If your former spouse is listed, contact your advisor to modify payout options.

We’ve helped clients restructure annuities after divorce to maintain income stability while removing joint ownership or beneficiary conflicts. It’s all about preserving guarantees without losing hard-earned value.

Using a Bonus Annuity to Offset Losses

If part of your annuity must be surrendered or divided, consider repositioning proceeds into a bonus annuity. These contracts offer upfront credits (often 5–10%) that can help recover value lost through surrender fees or market value adjustments (MVAs).

Bonus annuities can also maintain tax deferral and create a new income base for future withdrawals — a strategic move when rebuilding after a divorce settlement. Compare top options anytime on our annuity rate page.

Tax and Ownership Considerations

Keeping your annuity may have tax implications if not executed properly. Transfers outside a QDRO or formal court order can trigger income taxes and early withdrawal penalties. To avoid this, all ownership changes and distributions should be coordinated through the issuing carrier with divorce-specific documentation.

Our advisors coordinate directly with your attorney and the insurance company to ensure each step complies with IRS and state guidelines. The goal is to preserve both your principal and your tax-deferred status.

Post-Divorce Financial Planning

After a divorce, your financial priorities shift — and your income plan should too. Annuities can play a key role in creating stability, replacing lost income, and securing retirement confidence. Whether you keep your current contract or reposition into a new one, we’ll help you integrate it into a long-term plan that may include:

• Fixed Indexed Annuities for protected growth and guaranteed lifetime income
• Single-Pay Long-Term Care Insurance to safeguard your independence later in life
• Annuity Beneficiary Death Benefits to protect your legacy and heirs

Why Work with Diversified Insurance Brokers

We’re a fiduciary, family-owned firm licensed in all 50 states with over four decades of experience helping clients protect income during life transitions. Our advisors shop more than 75 A-rated carriers to find the best solutions for your situation. Whether you need to preserve a lifetime income rider or replace a divided contract, we’ll help you compare your best options with confidence.

Related Topics to Explore

• How Annuities Are Divided in Divorce
• What Happens to Your Annuity in a Divorce?
• Best Upfront Bonus Annuity
• Annuity Beneficiary Death Benefits
• Best Short-Term MYGA Annuities
• IRA Annuity Options