A client inherited an IRA from a parent. Client was receiving MRDs using her life expectancy (Appendix C Table I in Pub 590). Client had the IRA trustee transfer the IRA to a life insurance company for a fixed annuity that pays $X month for life (at least that is what she said). No 1099-R was issued by the trustee making the transfer. This makes sense when you have trustee to trustee transfers of IRAs. There is no reporting requirement as it is not a rollover. The life insurance company made a distribution and issued a 1099-R that shows the distribution as coming from an IRA. So... it appears that the funds were transferred from an IRA to an IRA.
The paperwork from the life insurance company shows the account as being owned by the client. It doesn't even have the word "IRA" in its name let alone the word "inherited".
The only information I can find on moving inherited IRAs is that a trustee to trustee transfer is the proper way to avoid taxation of the distribution. The money in an inherited IRA can be invested in an annuity. However, regardless of the amount of annuity income, the inherited IRA must still disburse an MRD based on the prior year-end IRA balance and the Table 1 life expectancy (as far as I can understand MRDs from Inherited IRAs).
The distribution (it's actually 12 equal monthly payments) is currently larger than what the life expectancy table for an inherited IRA would require as an MRD. But.... if the distribution is a fixed amount for life, some time down the road, the fixed payment will be less than a calculated MRD.
So... is this kosher?