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Could an annuity help your retirement and estate planning?

Wills and trusts play a big role in estate planning. However, our Virginia law firm understands that some clients may desire less expensive strategies for avoiding probate. Fortunately, there are financial products that serve that goal.

Generally, assets that have a named beneficiary can bypass probate, such as life insurance policies, annuities or payable-on-death accounts. After the owner’s passing, the beneficiary simply needs to show the bank or investment company a certificate of death to acquire access.

Of course, these financial products work well with other estate planning forms, including trusts. Organization is the key to finding the right combination for one’s individual needs. After an individual inventories all the desired assets and beneficiary transfers, an attorney that focuses on estate planning can summarize the available options.

There are a lot of products on the market, so it is important to make an informed decision. In the case of annuities, the general arrangement is a private contract where the annuitant makes a transfer in exchange for future monthly or periodic payments, usually for a finite period of time. In the event the annuitant passes before receiving all of the payments, the contract may authorize payment of the remainder to the designated beneficiary.

As with other types of contracts, annuities must comply with applicable state or federal laws. For annuities, the Health Care Financing Administration has established legal parameters for the interest rates at which payments are made, as well as the length of time. In certain situations, there may also be tax implications.

Source: FindLaw, ”The Power of Private Annuity Plans,” copyright 2017, Thomson Reuters

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