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Annuities and your estate plan can win

Jeffrey Apps and Tracy Tutag

Last week’s article on wills brought up additional questions regarding estate planning and retirement planning. The topic of annuities as it relates to different types of planning is often confusing, but it’s worth reviewing. While many people may consider annuities a part of their retirement plan, they can also play a critical role in your estate plan by helping you meet four important estate planning objectives.*Objective No. 1:Help ensure a steady income for heirs. Continuing to provide for your heirs after your death may be your most important consideration. Annuities usually offer a host of different payout options, and you can choose one that provides your spouse or your heirs with a steady stream of income for a specific amount of time or for as long as they are alive.Objective No. 2:Provide liquidity. Although an annuity is intended to be a long-term investment, many of today’s annuities provide access to your money free from the 10 percent federal income tax penalty and contingent withdrawal charges in certain cases such as a federally defined disability. In addition, many annuities offer a free withdrawal feature of 10 percent, for example, of the annuity account value, for those needing an income stream. However, ordinary income taxes and the 10 percent additional federal penalty may apply to withdrawals made prior to age 59_. In general, annuities are designed to provide a source of liquidity during retirement to help meet your needs and the needs of your family. You can designate a beneficiary to receive a death benefit, should you die before receiving the full amount of the annuity payouts, or set the annuity up to provide regularly scheduled payments to your heirs as indicated in Objective No. 1 above. Because an annuity bypasses probate, your beneficiary will receive the benefits you intended without the potential difficulties, delays and costs associated with probate.Objective No. 3:Build the value of your estate. An advantage of an annuity is that all earnings from your annuity, including interest and dividends, compound tax-deferred until withdrawn. Another advantage is that there are no limits to the amount you can contribute to a non-qualified annuity, which means that you can invest as much as you want and let your contributions and any earnings accumulate income tax-deferred.Objective No. 4:Wealth transfer funding mechanism. In some instances, it may be appropriate to use annuities to fund life insurance policies in order to help ensure the effective transfer of wealth to your heirs. This may be especially true in instances where large amounts of wealth are involved. When properly structured, using annuities to fund life insurance policies can help ensure that more of your hard-earned “nest-egg” goes to your heirs, rather than to the IRS. As you can see, an annuity can be a valuable part of your estate plan. For information about how to add annuities to your estate plan, contact your financial and legal advisers. Note: If you are buying an annuity contract to fund an IRA that already provides tax deferral, you should do so for the contract’s features and benefits other than tax deferral. The tax deferral of the contract does not provide additional benefits. Such investments involve risks, including the possible loss of the principal amount invested. Before you invest or send money, please request and carefully read a prospectus. Annuities and other investment products are offered through AXA Advisors, LLC. Annuities are a product of the insurance industry and surrender charges may apply in certain cases.Variable annuities are sold by prospectus and: Are not FDIC insured; Have no bank guarantee; May lose value.Jeffrey Apps and Tracy Tutag offer securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached at 926.0601 or tracy.tutag@axa-advisors.com.Vail, Colorado


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