Single payment immediate annuity (SPIA) - how to?

[toofrugalformycat]

I'm attempting to help my spouse with his chore of selecting and purchasing a SPIA. He is doing this because of an aging parent's desire to provide a lifetime monthly check to a former employee and friend. The friend lives in Georgia. My spouse lives in State A, and his parent lives in State B (don't know if that matters), and if possible we hope we do not have to travel to Georgia to do this.

1. We've never done this before. How to start?
2. The friend is not financially sophisticated and has been taken advantage of before. One goal is to set this up so the friend can't be snookered, or screw up the lifetime payment.
3. What issues to research? Reliability of the company is one, I suppose, but what else? How?
4. The aging parent may pass away soon. Is there anything we absolutely must do before this happens? There will be enough money in the estate to purchase an annuity paying the desired amount (according to Vanguard online quotes).
5. What am I not thinking of?

I'm sorry if this is impossibly vague. Any useful advice will be greatly appreciated. Thanks

 

[Rich_by_the_Bay]

Here is where I'd start.

 

[brewer12345]

FIREd went through this a year or so ago with his MIL, although the annuity was for her benefit. See if you can search up the thread or perhaps just PM him.

It might be wise to consult an estate attorney (to avoid potential problems with heirs or estate taxes) and/or an independent insurance consultant. The latter work very similarly to fee-only planners and they are usually actuaries who will help you structure/evaluate insurance products without any bias that comes from commission.

 

[meierlde]

I'm attempting to help my spouse with his chore of selecting and purchasing a SPIA. He is doing this because of an aging parent's desire to provide a lifetime monthly check to a former employee and friend. The friend lives in Georgia. My spouse lives in State A, and his parent lives in State B (don't know if that matters), and if possible we hope we do not have to travel to Georgia to do this.

1. We've never done this before. How to start?
2. The friend is not financially sophisticated and has been taken advantage of before. One goal is to set this up so the friend can't be snookered, or screw up the lifetime payment.
3. What issues to research? Reliability of the company is one, I suppose, but what else? How?
4. The aging parent may pass away soon. Is there anything we absolutely must do before this happens? There will be enough money in the estate to purchase an annuity paying the desired amount (according to Vanguard online quotes).
5. What am I not thinking of?

I'm sorry if this is impossibly vague. Any useful advice will be greatly appreciated. Thanks

One thing would be to make sure that the will and beneficiary designations are clear on the item, i.e. make sure even if the parent dies the wishes will be carried out. Some clause like, if an annuity for xyz has not been set up and funded by the date of my death, my executor is directed to buy such an annunity in this amount for xyz. (Not a lawyer, but they could take the intent and make it legal and legally clear)

Second, go to Immediate Annuities - Instant Annuity Quote Calculator.and you can get quotes on annuities knowing the age state of residence of the person getting the annuity and gender. Pick the company you like and go to their web site and set the deal up. (of course you do need to worry about a gift tax item here (at least filing the return) depending on how things evolve there might or might not be an estate tax impact, (depends on overall size of estate as well, might also check state gift taxes if applicable)

 

[pb4uski]

Here is where I'd start.

+1 or call your local Northwestern Mutual Life or New York Life agent.

Once the SPIA is purchased, the insurer is obligated to pay the friend as provided for in the contract so there isn't much to go wrong unless the fried gets greedy and tries to sell his payment stream to some fly-by-night outfit for cash.

 

[toofrugalformycat]

Thanks, everyone. We'll check out everything each of you said.

pb4uski, that is precisely what I'm concerned about, but I really wonder if there's any way to prevent that. I see ads on tv for that sort of thing and it makes me so angry! I just know that anyone who answers a tv ad like that is likely to get ripped off, and that's just the sort of thing this friend might do.

 

[toofrugalformycat]

My spouse has checked out everything recommended above (thanks, everyone), and more, and is seriously considering going with MetLife. He got the MetLife quote through Fidelity.
Does anyone have any red flags to throw?
Or attaboys would be ok too.

 

[rescueme]

He got the MetLife quote through Fidelity.
Does anyone have any red flags to throw?
Or attaboys would be ok too.

We purchased our SPIA through Fidelity a bit over 4.5 years ago. I can't say who it was from, since Fidelity handles numerous insurance companies and all the application plus subsequent data is reported under the Fidelity banner.

I won't get into the details of how/why we considered an SPIA; I covered that subject many times in the past on this forum. I'll just say that we are satisified with the results of the SPIA for our retirement income plan, along with the reporting by FIDO.

 

[toofrugalformycat]

FIREd went through this a year or so ago with his MIL, although the annuity was for her benefit. See if you can search up the thread or perhaps just PM him.

It might be wise to consult an estate attorney (to avoid potential problems with heirs or estate taxes) and/or an independent insurance consultant. The latter work very similarly to fee-only planners and they are usually actuaries who will help you structure/evaluate insurance products without any bias that comes from commission.

This sounds like excellent advice. However, because of the three different states involved, doesn't it seem like the estate attorney needs to be in the state with the elderly parent? Or am I wrong on this?
We looked for an independent insurance consultant here in our town but haven't found anyone who is licensed to work in Georgia. So far we have the phone number of an agent in Idaho but that does not appeal. We are in Alaska.

 

[pb4uski]

Thanks, everyone. We'll check out everything each of you said.

pb4uski, that is precisely what I'm concerned about, but I really wonder if there's any way to prevent that. I see ads on tv for that sort of thing and it makes me so angry! I just know that anyone who answers a tv ad like that is likely to get ripped off, and that's just the sort of thing this friend might do.

I agree. I have a friend who received a settlement annuity as the result of an accident a number of years ago and lives paycheck to paycheck (except he is self employed, but you know what I mean). He seems to be continually cashing in future payments and getting hosed. I have been tempted at times to play that role so he doesn't get hosed but I don't want to enable his undisciplined lifestyle and we are not that close.

I don't know if there is a way to prevent the beneficiary from selling their payments. You could ask around.

 

[rescueme]

I agree. I have a friend who received a settlement annuity as the result of an accident a number of years ago...

Depending on the state of residence (as where I reside) you cannot sell your structured settlement (annuity) without court approval, and if it is within the best interest of the receipient:

Pennsylvania Structured Settlement Protection Act | Sell Annuity in Pennsylvania