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Sherry Keegan, CRC®
   

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The newsletter articles on this page provide valuable information on timely and interesting financial issues across a variety of subject areas, including retirement, investments, personal finance, annuities, insurance, taxes, college, and government benefits.


How Much Do You Know about Social Security?
Keeping Market Volatility in Perspective
Retirement Plan and IRA Limits for 2012
Can I provide annuity payments to my heirs after I die?
Non-Equity Alternatives to Rock-Bottom Yields
Why Women Need Social Security
Retirement Rules of Thumb


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Can I provide annuity payments to my heirs after I die?

You may be able to provide income payments to your heirs for the rest of their lives through the use of a stretch annuity. A stretch annuity (also known as a legacy annuity) makes lifetime payments to the beneficiary you name in your deferred annuity contract if you die before the annuity start date (e.g., before you begin receiving regular annuity payments).

According to the rules regarding distribution of deferred annuity death proceeds, an annuity beneficiary other than the surviving spouse must receive the annuity proceeds within one year from the date of death. Often, the beneficiary will elect to receive the proceeds in a lump sum, subjecting all of the annuity's accumulated interest to income tax, significantly reducing the value of the beneficiary's proceeds. A better option might be to allow the annuity's death benefit to be paid over a number of years, in which case only a portion of each payment is subject to income tax and the balance of the annuity can continue to grow tax deferred.

Generally, most annuity issuers allow the beneficiary to elect how the proceeds are to be distributed. However, some issuers allow the annuity owner to determine how the annuity's proceeds are to be distributed. In either case, in addition to the lump sum payment, most issuers allow the proceeds of a nonqualified annuity to be distributed:

  • Over a period not to exceed 5 years
  • Annuitized over a period no longer than the beneficiary's life expectancy, including a period certain, such as 10 years
  • As scheduled withdrawals based on the beneficiary's life expectancy according to the IRS life expectancy table

A stretch annuity may be most appropriate:

  • For beneficiaries in a high income tax bracket who would pay substantial income tax on annuity earnings if received in a lump sum
  • For beneficiaries who may be spendthrifts and might be better served by receiving systematic payments as opposed to a large, lump sum of money
 
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 Securities offered through Cape Securities, Inc., Member FINRA,SIPC,MSRB.
Advisory services offered through Cape Investment Advisory, Inc. Clearing services provided by Hilltop Securities, Inc. Investment advisory services offered through Cape Investment Advisory, a registered investment advisor. Additional services may be offered through Sherlyn Keegan and Keegan Wealth Management & Retirement Strategies, LLC which are not offered through Cape Securities, Inc.   Cape Securities, Inc. and Keegan Wealth Management & Retirement Strategies, LLC are not affiliated.

 



This communication is strictly intended for individuals residing in the state(s) of FL, GA, IL, OR and VA. No offers may be made or accepted from any resident outside the specific states referenced.
 


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