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How to Buy an Annuity – Setting Up Your Annuity Beneficiary

Stan Haithcock
July 14, 2022
How to Buy an Annuity – Setting Up Your Annuity Beneficiary

Today's topic is setting up those annuity beneficiaries, so when your Learjet hits the mountain, you make sure that the annuity company doesn't keep a penny, even though they're on the hook to pay for the contractual guarantee you put in place. Yet when you die, all unused money will go to the beneficiaries if that's how you want to set it up.

Who’s Your Beneficiary?

All right. So the question you probably have in your mind is, "Hey, Stan The, Annuity Man, America's annuity agent®, who actually can be a beneficiary on an annuity policy?" Just remember, first of all, annuities are contracts. So when you go through the application process with us, we want you to be a client, and we go through and fill out all that confidential, non-shared information; we are going to ask you, "Who do you want as beneficiaries? Of the policy?" So who can that be? That can be a person, wife, spouse, kids, uncles, aunts, or anyone with a social security number. It can also be a charity. Yes, it could be a charity if you're so that inclined or charitably inclined. It also could be a trust if your lawyer instructs you, "Hey, have everything from a beneficiary standpoint; it’s not up as a trust."You can have the trust as the beneficiary. So it's up to you. You just have to tell us how you want to structure it.

Structuring the Policy

Much of it also comes down to how you structure the policy. Now, most people, most, not all, want it structured so that the guarantees are in place, like the lifetime income guarantees, or if it's a principle protection product with interest, you're getting those guarantees, et cetera. But most people want to make sure that when they die or if they die soon unexpectedly when their Lamborghini hits the tree, they want 100% of any unused money to go 100% to the list of beneficiaries of the policy and the evil annuity company, not keep a penny, even though they're on the hook to pay for the contractual guarantee that you signed up for. You can do that.

There are annuities for principal protection. There are annuities for long-term care. It depends on what annuity type you are structuring but remember this. You can structure them so that 100% of any unused money goes to the beneficiaries.

Now with some income products, you can structure, there are about 40 ways to structure, but life only is the one in that people have a lot of time in their heads. Life only means that when your Learjet hits the mountain, money goes poof, and there's no money for the beneficiaries. But the majority, listen to me, listen, the majority of people structure the lifetime income guarantees if lifetime income is what you're trying to solve so that 100% of any unused money will go to your listed beneficiaries on the policy. You can structure that in a myriad of ways. You can say, that lump some when I die, I want that amount, I want it to go lump sum to my beneficiaries. I want them to get it all, one shot. Or, if you're like me, you don't want your daughter to attend the funeral in a paid-for Lamborghini. You want them making payments on the Lamborghini. You set it up to where there are payments, that total amount left when you die, payments are coming to them until the money's exhausted.

Now, if you set joint life up with a spouse, just as an example, and you die, then the income stream continues uninterrupted and unchanged for the spouse's life, as long as they're breathing. Okay? And when they pass, 100% of any unused money can be structured to go to the listed beneficiaries of the policy.

So get that out of your head if you have a financial advisor or read something, "What is that? That's like me. It looks like Elvis’s hair anyway." I mean, get that out of your head, "Well, I'm never going to buy an annuity because when I die, Stan, money goes poof." Don't be a dummy. That's only one of 40 ways to structure it.

Your Beneficiaries

Now let's talk about beneficiaries for a second because, in most cases, beneficiaries are family members. Family members upset you and they can be mean and nasty and change their tune. Nod your head. Beneficiary designations on annuity policies can be changed. Yes, you are in control. As long as you're breathing, you are in control. So if that daughter, son, uncle, aunt, or wandering ambiguity of a family member makes you mad, you can call us up. "Hey Stan, The Annuity Man®. Bought the annuity from you. The process was great. The administrative team was great. I loved your team, but I'm not in love with one of my beneficiaries because I want to change them from the policy." We'll send you the form, and we can change it. And there's no limitation upon changing. So if they come to the Christmas party next Christmas, and they're not drunk, and they give you a good present, then you call me in January and say, "Hey, put them back on the policy as beneficiaries. We can do that. The bottom line is that you're in control of those beneficiaries and can list as many as you want.

Let's go through those beneficiary’s designations. As an example, you can have, let's just say, it's on your life with a cash refund. You can have your spouse as the primary beneficiary. And if something happens to her, you have the kids as secondary beneficiaries, and then you can have the grandkids as tertiary beneficiaries. Tertiary means three. So staggered. Primary, wife, kids. And so if someone dies, they just move up, like that. Again, you can change those beneficiaries, but understand that annuity strategies, lifetime income strategies, and the policy’s structure can be customized. Let me repeat that. You are customized to fit your specific situation, goals, hopes, and dreams.

There is no size fits all. What I'm going to ask you is how do you want it structured? Let me spell out the ways that you can structure it. What fits your specific situation? A lot of you out there said, "You know what? My kids are going to get a ton of stuff. They're going to get the house. They're going to get all my stocks and bonds. I'm going to get the highest contractual guaranteed payment, life only, and there's not going to be anything for the beneficiaries." That's fine. It's your call. But what I want to point out is when you're setting up beneficiaries with policies, and remember there's not just one annuity, there's not just one restaurant, there's not just one truck, there's not just one shoe. There are many types of annuities. Okay? There are lifetime income annuities. There are annuities for principal protection. There are annuities for long-term care. It depends on what annuity type you are structuring but remember this. You can structure them so that 100% of any unused money goes to the beneficiaries.

Love is the Answer

All right. So the burning question should be, wait a minute, "Stan The Annuity Man, I don't want to list beneficiaries. I don't like those people. Why should I do that?" First of all, and let's get a little sappy here and a little emotional because you know I'm an emotional person. First is love, love for family. I mean, we want to take care of them. We want to take care of our kids. We want to take care, but that's not the real reason. The real reason is if you list someone as your beneficiary, person, place, or thing, kids, wife, uncle, aunt, trust, charity, then it passes outside of probate. Got it? That's the reason. Now love should be the reason, but we all know that's crazy talk, for most people, for most rational people. It's about passing outside of probate. That's really the reason you should consider it.

The bottom line is this. You really don't want your annuity stuff to go into probate. There's just an easy way to get around that. It is listing beneficiaries. Again, people with social security numbers, or charities, or a trust, as the beneficiary and probate be damned. No probate.

All right, like everything in life, nothing's just totally simple and easily explainable. I always say to people, "If you can't explain it to a nine year old, don't buy it." But with the beneficiary designations, there are some caveats that. With principle protection products, like a Multi-Year Guarantee Annuity, your beneficiaries are going to the lump sum. Depending on the tax law, they do have choices on how they can take that money. Just remember, you want to list them for love, and to avoid probate.

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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