Annuities

There’s more to retirement than managing assets; you must also ensure that those assets are titled correctly. Not doing so, particularly in regard to annuities, can have major implications for you and your loved ones.

Let’s say you decide to invest move some of your assets from a mutual fund to an annuity because you want your beneficiaries—your children—to receive the annuity death benefit. The chart below illustrates.

Sample titling of an Annuity vs. Mutual fund:

This seems simple enough but not so fast. Mis-titling the annuity could potentially result in an unexpected payout with undesirable tax consequences. Here’s how. Again, John and Jane Doe are the owners of the annuity. If John Doe dies, the annuity would in all likelihood pay out to the beneficiaries, the children, even though Jane Doe is alive. That’s because death of an owner generally triggers a payout to the beneficiaries.

If you’re in a second marriage, you may face a conundrum: You want to share ownership of property with your new spouse, but you also want your children from your first marriage to inherit your share of the property when you die. What to do? You and your spouse could be joint owners of the account, with the beneficiaries listed as your children. As beneficiaries, then, your children would receive the annuity benefit upon your death.

Although the husband and wife have been listed as joint owners, you don’t want to list them as joint annuitants or else the children will receive nothing until the death of the second annuitant.  The issue of titling your assets, an estate planningissue, is not just for the rich but for anyone that owns anything of value.

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Tags: annuitant, asset titling

This entry was posted on Thursday, October 30th, 2008 at 12:07 pm and is filed under annuity titling. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.