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Annuity Beneficiary

Stan Haithcock
October 29, 2023
Annuity Beneficiary

Hi there, Stan The Annuity Man, America's Annuity Agent license in all 50 states. Today's topic is about annuity beneficiaries. You are either thinking about who the beneficiaries should be on your policy or you are the beneficiary of a policy. Either way, we're going to talk about annuity beneficiaries and why that's important, regardless of whether you are the beneficiary or if you're thinking about listing beneficiaries.

‌The Structure

‌So, here are the basics when it comes to annuity beneficiaries. Number one, annuities, plural, different types: SPIAs, DIAs, QLACs, MYGAs, Index and Variable Annuities. All of them, you can list beneficiaries of the policy.

‌What does that mean, Stan The Annuity Man, America's Annuity Agent? That means when your Learjet hits the mountain, when your Dodge Ram truck hits the tree, and you die, whatever money's left in the account, if you structure it so that the beneficiary will get it, they will get it. You can structure it so that the beneficiary can get the money in a lump sum format, or you can structure it, so they get payments until the money's exhausted.

‌But understand that you can structure it so that, let's say, in a lifetime income guarantee product, like an Immediate Annuity, you can structure it so the annuity company's on the hook to pay as long as you're breathing. So, if you live forever and there's a medical miracle, they're on the hook to pay. But when you die, whatever money is left in the account goes 100% to the beneficiaries. And the annuity company never, ever, ever keeps a penny under any circumstance, even though they're on the hook to pay.

‌Listing Beneficiaries

‌When it comes to listing beneficiaries, and you're the owner of the policy, and you say, you know what, Stan? I've worked hard. I kind of like my family at times, unless it's like Christmas or something, and Uncle Jim gets drunk and whatever. The point is, you're going to list beneficiaries. You can list as many as you want.

‌Let's give an example. You have a wife, and you have two kids, and you have grandkids. You could have the wife as the primary beneficiary of the policy. You could have the kids as secondary beneficiaries of the policy, meaning if your wife died, they would move up, and then you could have the grandkids under the kids. That's how to structure beneficiaries if you're the policy owner.

‌Beneficiary Changes

‌Understand this, too; you can change beneficiaries at will. So, we go through the application process, and you list the beneficiaries. We're going to need their information, contact information, in case you die. You can list them, but you can also change them. If they make you mad, if they piss you off, if they didn't send you the birthday card, and you're like, they didn't send me a birthday card, screw them! I'm taking them off the policy. You can do that. And if they make nice, you can put them back on. So, it's not irrevocable. You can change beneficiaries as much as you want on your policy.

‌Life Only

‌But let's say you don't want a beneficiary. You hate your kids. They make you sick. They've taken your money and don't appreciate that you're such a baller and great human being; they're mean to you and never call. Then you could do what's called a life-only type payout on an Immediate Annuity, and they don't get anything. And you get the highest payout. So, you don't have to have a beneficiary. But if you do, you can list them however you want to list them with policies.

‌Time to See a CPA

‌Now, with Deferred Annuities like Multi-Year Guarantee Annuities, Index Annuities, or Variable Annuities, you can have beneficiaries on that policy. Can a trust be a beneficiary? Yes, it can, but we're getting into tax questions. Also, if you are a beneficiary of a policy and inherit it as the beneficiary, it's time to see a CPA. It's time to see a tax lawyer. It is not time to take tax advice from people who don't have those qualifications.

So, just put that in the back of your head. Suppose you're the beneficiary of a policy, and we're at the time where there's a lot of transfer of wealth. In that case, there are a lot of annuities that are being transferred to the beneficiary because the mom or dad or whoever died, it's time to pay a little bit of money and see a CPA and a tax lawyer to get sage and accurate tax advice.

‌Control It From the Grave

‌All right, so let's talk about beneficiaries. If you're the spouse and you're the beneficiary, you have more options than a non-spouse, than the kids. And that's just the law. You need to know that. The other thing you need to know is if you're the policy owner and want to restrict how that money will go to the beneficiaries, you can control it from the grave. Most carriers will allow you to do that. So, just put that in the back of your mind.

‌If you have something in your mind that you don't want them to come to your funeral in a paid-for Lamborghini, you want them to be making payments, or whatever is in your mind that you want to restrict those payments, you can do that. But once again, you need to get us involved. You need to get a CPA and tax lawyer involved.

‌But if you are the spouse or setting up your spouse as the primary beneficiary, the spouse has more options and choices than non-spouses, like kids.

‌Have a Sit-Down Conversation

‌Obviously, if you use us, you're using the best team on the planet, and we do this all day long and can help you with all of this. But I encourage you to have a sit-down conversation eventually with the beneficiaries and say, hey, I bought this lifetime income annuity. Or I bought this Multi-Year Guarantee Annuity for principal protection, or whatever it is. And I've listed you as a beneficiary, and here's the reason why, and here's what's going to happen, and here's what you need to do. And oh, by the way, you can book a call with The Annuity Man at anytime to discuss this. He knows what he’s talking about, and his team will take care of you if and when I pass away.

‌So, I would have that conversation with the beneficiaries. Understand that when you list them, we will need specific, non-shared, confidential information on the beneficiaries as well. Let them know what's taking place, and that's safe and is not shared information. It's confidential. We take that very seriously. But I would have a conversation with the beneficiaries if you're the owner of the policy, and just explain to them what it is and what you're buying, why you're buying it, and what they could possibly get upon your death.

‌Inherited Annuities

‌Too many times, people are calling me, and I get four or five a week. And these people inherited annuities they had no idea mom and dad owned.

And if you're a mom and dad out there, have that conversation with your kids. I mean, when I can get my two daughters in town and we got to dinner, I'm always saying, "Okay, if something happens to me or something happens to me and your mom, here's where the stuff's at. Here's where you need to go. Here's who you need to call. Here's how it works. Here are the annuities that we own. Here's how they work and how you would benefit if we passed away. Or, what's going to happen."

‌Map out those logistics; let us help you do that. But from the beneficiary standpoint, if you are the beneficiary of the policy and you had no idea that mom and dad had it, and you're like, I got an email this morning, the guy's like, well, I got this annuity from my mom didn't know she owned it. What do I do now? You can schedule a call with us, and we can walk you through some of the details and some of your choices, whether you're a spouse or, one of the kids, or one of the grandkids, whatever. Different rules apply, and we can help you with that.

‌Client Example

‌Before I did this blog, I was on the call with my administrative team, who, by the way, are phenomenal. And they said, make sure to bring up this situation because we get this occasionally. We had a person a couple of weeks ago, and this happens a lot, but this happened again. They bought a Multi-Year Guarantee Annuity. Once again, that's the annuity industry version of a CD. And we got to the beneficiary part. I said, okay, who do you want to list as beneficiary? And the person said, nobody. We're like, okay. And he was adamant about that. Then, we are going to put the beneficiary is the estate. So, it's going to go through your estate.

Why is that a problem?

‌One of the good things about annuities is they pass outside of probate. Period, if you list the beneficiary. But if you don't list the beneficiary and we put estate, guess what? It goes through probate. Now, you might not care and want to stick it to your family and have them go through probate.

But I would encourage you, and this happens occasionally, but I would encourage you to find somebody or some charity or whatever to list as the beneficiary of the policy. Just don't say, "Screw them. I don't want to list anybody. Don't put anybody down." Because then you're not taking advantage of that probate-free clause with all annuities. Just keep that in mind.

‌So, that was riveting and motivating, talking about beneficiaries. And one more motivational thing to leave you with, as my friend Bill Black says, he's the best life insurance guy on the planet. "One out of one of us is going to die."

‌Of course, it's going to happen. You need to think about who you're going to list as the beneficiaries. And if you are a beneficiary, we can help you get through those waters of decisions you must make, whether you're a spouse or a non-spouse.

‌Give me virtual high-fives down there. And then let's see, one last thing. Oh yeah, I'll see you on the next Stan the Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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