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What Happens to an Annuity When You Die?

Stan Haithcock
December 28, 2023
What Happens to an Annuity When You Die?

What happens to an annuity when you die? First of all, you're dead, who cares? But that's not a good answer, I don't think. We're talking about annuities and death; that's a tough combo. So, what happens to an annuity when you die? It depends on the type of annuity. It depends on how you structure that annuity. Let's go through the types and talk about you dying. How about that? That sounds like fun, right? Let's talk about you dying. That's not fun. I always tell my wife and my kids that you guys are set up when I die. I mean, I'm such a nice person. I've got all this life insurance. I've got all these annuity payments set up for you. When my Learjet hits the mountain, I don't have a Learjet, by the way, I don't, but I'd like to.

‌Annuitized Products

‌Okay, so you're dying. You have this annuity. Let's talk about the annuity type. Let's say you have an Immediate Annuity, a Single Premium Immediate Annuity, a Deferred Income Annuity, or a Qualified Longevity Annuity Contract. I know that's a lot, but what are those? Those are annuitized products, meaning that they create a lifetime income stream. Most of the time, you can set them up for that. You can also set them up for a period certain as well, or a combination of the two. But with all three of those, they're customizable. What does that mean, Stan The Annuity Man, America's annuity agent, the number one agent in the country? That means you can structure it so the evil annuity company will never keep a penny. They will never keep a penny regardless of how long you live. I mean, they don't have to because people always call me up and go, "I've never bought an annuity, Stan, because when I die, the company keeps some money. Money goes poof." If I get that question one more time, I'm going to psh. That's only one of about 35 ways to structure it. That "Stan The Annuity Man company is going to keep the money." That's called life only. If you want to do that, fine. If you hate your kids, fine. If you hate your wife, fine. If you want to get the highest contractual payout, fine, because that's what life only does.

‌But you don't have to do it that way. You can have the annuity company on the hook to pay you for the rest of your life, but when you die, whatever money is unused goes to your list of beneficiaries. So, under no circumstance does the annuity company keep a penny. Most people want that. Most people are looking for that. Most people worked hard for their money. Most people don't want that money to go to the annuity company. But most people are under the impression that if they buy an annuity, the money goes poof when they die. Incorrect. You can structure it so that they're going to get the money.

‌Now, you have to understand that any lifetime income stream, regardless of the type, regardless of what any eager annuity agent tells you, is a combination of return of principal plus interest. Yes, you're getting your money back with interest, but yes, the annuity company's on the hook to pay for the rest of your life. That's a good thing.

‌Income Riders

‌Let's talk about other types of annuities when you die. We talked about the income annuities, those types of things that when you die, what happens. Let's talk about other types of annuities. Let's talk about the ones that have Income Riders. Income Riders can attach benefits to a policy providing a lifetime income stream you can never outlive. For instance, you've got a Variable Annuity or Index Annuity. Draw a line down the middle of the page visually. The left side is the Variable Annuity or Index Annuity side. The right side is the Income Rider side. The income rider side is the lifetime benefit income stream, the lifetime income stream. But when you die, the left side, accumulation value, is what your beneficiaries get. Now, when you're taking income from that product, there's a subtraction of that income from both sides. When you die, whatever's left in that accumulation value goes to your list of beneficiaries. Once again, the evil annuity companies do not keep a penny.

‌Multi-Year Guarantee Annuities

‌Now, Multi-Year Guarantee Annuities is the annuity industry version of a CD. What happens when your Learjet hits that mountain? Boom. By the way, I was on a plane the other day. I'm thinking to myself, what if we just ran into the mountain? I mean, what if another plane hit us? I mean, I'm always thinking. First of all, I'm thinking like, well, financially, I've got everything in order. It's all good. I've had a good run at this. It's been a good life. I'm in my mid-fifties. I know I look younger. I know it's impossible that I'm in my mid-fifties. Seriously. But I'm thinking to myself, what happens when the plane hits? Hopefully, it's over quickly. I've got this assumption, though. There's like two seconds that stinks, but I digress.

‌So, with a Multi-Year Guarantee Annuities, you die. What's left? The money that's in the Multi-Year Guarantee Annuity, right? Fixed-Rate Annuity, plus whatever interest is earned, if you haven't been taking that interest on a monthly basis. Once again, Stan The Annuity Man shooting down all these myths of, well, the evil annuity company's going to keep the money. 99% of the cases, no. And that other 1% depends on you because if you customize the policy, life only, that's the only way the evil annuity company will keep the money.

‌All right, because we've done this death thing. I've done another video. I know I'm not this Mr. morbid guy, but its called How Does Annuity Death Benefits Work? That's more on the inheritance part of it. This blog was more about you knowing what happens, but there are some ways you can also structure it for your beneficiary so that they don't buy a Ferrari because they will buy a Ferrari if you die and then show up to your funeral. You just need to ensure they're making payments on that Ferrari, right? So, make sure to go to that video. Make sure to go to my site to get the best quotes on all carriers with all products using my proprietary annuity calculators. You can download my seven books on annuities as well. With that being said, 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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