So all of us want to take care of our loved ones financially. I mean, that's a goal. There's a myriad of ways to do that but of the best ways, and I don't sell this product, is life insurance which happens to be the best wealth transfer to your beneficiaries as possible. But we're going to talk about annuities, because annuities do have their place when it comes to taking care of your loved ones.
All right, so talking about life insurance, I mean, it's a great product. The downside is you have to qualify for it. You have to be underwritten for it, and get medical tests, and all that stuff. But if you can pass that, and there's some guaranteed issue stuff as well, I guess. But for the really high death benefit, you're going to have to go through the underwriting process. But with annuities, you don't have to do that. They're guaranteed issue. So let's talk about a couple of ways to take care of your loved ones using annuities..
Now, annuities have a monopoly on lifetime income, and had been sold in this country for hundreds of years for just that. It's a transfer risk that you can never outlive the income stream. Annuity is the only product that can do that. In saying that, you can take care of your loved ones with that contractual guarantee as well. Let me explain a couple scenarios and examples. Number one, if you said, "You know what? I just want to leave a legacy of income." You can buy what's called a period certain. In other words, Stan, I want income for 30 years, or I want income for 35 years, or I want income for 20 years. So after that time period, money goes poof, and it's gone. But you're not going to lose a penny, it's going to be paid out to a beneficiary.
But for a lot of my clients who are late in their years, they want to provide an income stream to their family. So with annuities, you can structure it so that the guaranteed income stream is going to go to the list of beneficiaries. And by the way, you can list as many beneficiaries on the policy as possible with most carriers. I'd love to talk with you about how to structure a lifetime income stream to take care of your family and it doesn't have to be a period certain. You could say, "Stan, I want it for my lifetime with a 30-year certain." That means it's going to pay for your life regardless of how long you live. So if you died in five years, there's 25 more years of payments or if you died in 11 years, there's 19 more years of payments. Therefore, there's at least 30 years of payments going to somebody. But if you live forever, it's still going to pay you.
So talking about lifetime income streams, you can use single premium, immediate annuities, and deferred income annuities. Pretty much the same product, but the difference is the starting date. With immediate annuities, you can start the income as soon as 30 days from the policy being issued up to a year. With deferred income annuities, that income can start as soon as 13 months and out to at least 30 or 40 years. We can structure and customize it just the way you want it.
Another product that works from the standpoint of taking care of your loved ones is a new product. The newest annuity type called a qualified longevity annuity contract. In 2014, the IRS and the Department of the Treasury developed this product, so that people could take their traditional IRAs and some employer plans. However, most people using QLACs today are using their traditional IRAs to set up a guaranteed lifetime income stream. But here's the catch, and here's the good news. You can take your personal IRA, and you can attach a lifetime income benefit for not only you, but you and your spouse or partner. So you can take your traditional IRA, and then add them as a lifetime income benefit guarantee, which is really, really good.
It's a way for you to take those assets, and then have your spouse or partner attached to them as a pension type income, and as another social security type payment. To me, QLACS are perfect for people that hate annuities because I'll guarantee you that your spouse doesn't like the stock market as much as you like it. Or doesn't want to put the money at risk like you want to.
The last way to take care of your loved ones using annuities is by using an annuity as a death benefit. Now, once again, life insurance is the best death benefit strategy on the planet if you can qualify for it. But if you're one of those people that have some health issues, and you can't qualify, you can buy an annuity with an attached death benefit rider.
In essence, it's going to grow by a specific percentage that you can leave to your heirs. Now, unlike life insurance, it's not tax-free. I know you're saying, "Wait a minute, Stan. Annuities are issued by life insurance companies." I understand that. There's a little bit of confusion there. But with annuities, that death benefit is taxable to your beneficiaries. But you know what? You're dead. And the other thing is if you can't qualify for life insurance, you really don't have any other choice. I like those death benefits attached to annuities, because they're guaranteed issue. You don't have to go through any medical testing, or random nurses coming into your house.
Also, in a lot of those situations with these death benefit riders, the beneficiaries have the choice to take it lump sum, or they can take it over a five-year time period to lessen that tax hit. With all of these quotes, remember, annuities are like a gallon of milk. When you get any annuity quote understand that every seven to 10 days quotes kind of change. That doesn't mean that you have to buy one, or you should be pressured into buying one. But understand, in those seven to 10 days, you have to make a decision and have the application and process to the carrier to lock in that rate. Although you never necessarily have to do that.
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.