LA Probate Law Discusses Annuities
An annuity is a form of an insurance product. The California Department of Insurance (CDI) does not recommend or disapprove of these products. However, being an informed consumer can help prevent you from being the victim of unscrupulous sales practices and it helps you to make educated decisions for yourself and your family. All insurers, brokers, agents and others engaged in the transaction of insurance owe a prospective insured who is 65 years of age or older, a duty of honesty, good faith, and fair dealing. The value of the annuity contract, determined as of the date of death, is added to the owner’s gross estate says LA Probate Law. This is usually the amount that will go to the owner’s estate or the designated beneficiary. If there is no remaining benefit at death, the value is zero.
Types of Annuities
An annuity is a contract in which an insurance company makes a series of payments to you at regular intervals in return for a premium. Annuities are often bought for future retirement income. The proceeds from an annuity can provide you with an income for life, or for a specified period of time. There are two basic types of annuities. The first is when you pay a lump sum to an insurance company and they start to pay it out to you right away in periodic installments. This type is known as an immediate annuity – the payments to you start immediately. The second, and more common, is where money paid by you accumulates interest over a period of time explains LA Probate Law. If you choose this type of annuity, the principal and accumulated amounts will then be paid out to you in periodic installments, usually when you retire, in order to supplement your retirement income. This type is known as a deferred annuity – the payments to you are deferred for a number of years. Currently, a deferred annuity may have tax advantages in that income tax is not owed until you start receiving distributions from the annuity. Both types of annuities offer you certain options for receiving your income.
Options with Annuities
Life Annuity, the insurer will pay you an income for as long as you live. However, there are no survivor benefits. This means all benefits cease upon your death. Period Certain Annuity, the insurer will continue to pay your survivor an income for a specified period of time. Life Annuity with Period Certain, the insurer will pay you an income for as long as you live, but if you die before the certain period that you have chosen (Period Certain), the income will be paid to a survivor (beneficiary) you designate until the end of that period. Joint and Survivor Annuity, the insurer will pay an income to you during your life, and after your death will pay a percentage of that income (50% or 75%, for example) to a survivor you designate for his or her life. Annuities are the type of investment that sounds too good to be true: You invest a certain amount, you receive a tax-deferred payment from the annuity for a fixed number of years, and there is even a death benefit state LA Probate Law. According to the investment advisors that I work with, annuities may be a good investment for someone who is in a high income tax bracket, and who is also not a senior citizen. But, according to one independent insurance analyst who was quoted in the Wall Street Journal, “Annuities are almost never appropriate for seniors.” The commission paid to the investment advisor is often in the 6 percent range, and sometimes as high as 8 percent. At a 6 percent commission, for example, sale of a $200,000 annuity will bring in $12,000 for the investment advisor.
In recent years, there has been an increasing emphasis on deferred annuities. If you are going to make a good choice when you buy a deferred annuity, you need to understand what kinds are available. If one kind does not seem to fit your needs, find out about the other contracts that are described in this guide. Fixed Annuities guarantee that your money will accumulate at a minimum specified rate of interest. However, the company may pay you a higher rate of interest if its investment experience is better than the minimum guarantee. A fixed deferred annuity always contains guarantees. For example, it might guarantee that the interest rate on the funds accumulating in your policy will be at least 2%. Variable Annuities differ from fixed annuities in that you direct the distribution of your money among several different accounts and the accumulated funds reflect the experience of those accounts rather than that of the company expresses LA Probate Law. Typical account choices are: common stock, bond, mortgage or money-market accounts. If the value of your accounts increases or decreases, it will affect the accumulated amount. Variable annuities are more risky to you than fixed annuities because you can lose money that you put into the annuity, but there is a possibility of greater returns. Other types of deferred annuities combine the characteristics of fixed and variable annuities. Annuities are sometimes sold as alternatives to investment vehicles such as certificates of deposit, money market accounts, mutual funds, etc. Each investment may affect your financial plan in a different way. You should consult with your investment and/or tax advisor before making any decisions on purchasing this product.