Death as an Annuity Strategy

Today’s topic is a good one. Is death an annuity strategy? Can you actually use annuities in a way that ties into what happens when you die?

It sounds unusual at first, but yes, you can use annuities as part of a plan that activates when you pass away. You only get one chance to use death as a strategy, so you want to make sure it is set up correctly. Let us walk through how people actually do this and why it can make sense.

Handcuffing Your Beneficiaries With Love

I had a client recently who said, "I want to leave money to my kids, but I do not want to hand them a lump sum." I call that lovingly handcuffing your beneficiaries with love.

You do not get a giant pile of cash because I love you. You get structured payments, so you do not blow it all at once. Nod your head, because you know exactly what I am talking about.

To do this correctly, you meet with your estate planning lawyer. Never get tax advice anywhere else. Tell the lawyer that, upon your death, you want your kids to receive a lifetime income stream.

There are two ways to set it up. You can direct the trust to pay them a specific monthly amount for life. Or you can leave them a set amount of money that must be used to purchase a Single Premium Immediate Annuity.

You do not need to choose all the contract details now. You are still alive. But if you want to control things from the grave, you can specify the structure, such as life with cash refund or life with installment refund. That makes sure your heirs, and even future grandkids you do not know yet, receive the unused money if your child passes away early.

Different Kids Need Different Planning

Most families have one go-getter and one wandering ambiguity. You know exactly which is which. You can treat them differently inside the estate plan while still keeping the same structure of income triggered at death. You have full control as long as it is written properly in the trust.

QLACs Can Also Be Used as a Death Strategy

Here is another example. A Qualified Longevity Annuity Contract is a lifetime income pension product using IRA funds. If you are seventy five and your spouse is much younger, let us say fifty or sixty, you can set up joint life income. When you die, the income continues for as long as your spouse is breathing. When your spouse eventually dies, one hundred percent of any unused money goes to your beneficiaries, not the annuity company. That is using an annuity as a death strategy.

Your spouse has put up with you for years, so yes, you can ensure income continues for them after you are gone. It is very similar to how people structure Social Security for a surviving spouse.

Planning Ahead While You Are Still Here

I am not encouraging you to walk around in black clothes thinking about death. But the truth is simple. While your brain is still working, you should set things up so that if something happens to you, income continues for the people you care about. Do not put this off. Meet with an estate planning lawyer. Interview a few if you need to. Put the instructions in writing so everything is triggered exactly how you want when you die.

We can help you with the annuity side at The Annuity Man. We do not provide tax advice, but we can work with your attorney to define the products and strategies that best fit your goals. And if you want to set up joint life annuities now while you are alive, we can show you quotes for that too.

The Way We Do Business

Every person on my team is licensed in all fifty states, but no one is on commission. We are not hammers looking for nails. You make the decision on your terms and on your timeframe. We give you the information, and we answer your questions, then we leave you alone. That is how it works, and that is how it should work.