Another Annuity ?

[Joylush]

I understand the dislike of annuities. I don’t need them but I have a couple of deferred annuities with USAA for the diversification and tax deferral. The rates they paid at the time were good.

Either I cash them out and pay the taxes, roll them into another deferred annuity, or can choose to turn them into income annuities.

My though is to eventually turn them into income annuities and have them pay out for my lifetime and the lifetimes of each of my children. So I would get a monthly payout for life which would continue to payout to each adult child for their lives.

It seems a good way to protect a portion of their inheritance for them. I’m trying to figure out any downfalls. Sure I know it will reduce my monthly payout amount since it’s covering the life of a younger person as well but I don’t need the money anyway,

 

[Sunset]

The kids will probably want the cash.
Cash from your stock account would be tax-free unlike an annuity payout.

My experience was everyone wanted the cash instead of monthly annuity payments, me included.

 

[Joylush]

The kids will probably want the cash.
Cash from your stock account would be tax-free unlike an annuity payout.

My experience was everyone wanted the cash instead of monthly annuity payments, me included.

It’s not about what they want. It’s to provide for them long term. The money inherited from a traditional IRA account is not tax free either. And they will get plenty of cash. I’m trying to figure out a way to guarantee it won’t all be squandered or otherwise lost.

I suppose some sort of trust can be used to preserve the inheritance but I thought an annuity might be a consideration as well. Trying to learn the pros/cons.

 

[TheWizard]

You should only be looking at Immediate Annuities, which start paying you lifetime income next month, either fixed or variable...

 

[MarieIG]

Yes, I heard of that recently on a Stan the Annunity Man video. (Don't know that I would be able to find it again as he has so many.)

Maybe you want to order his free booklets and read about the different types of annuities. IIRC, the kiddos would be the "survivors" but you may want to have a different "owner" such as a trust to prevent kiddos from selling the annuities for a (very reduced) lump sums to one of those "Get Cash Now" opera singers, i.e. JG Wentworth.

 

[pb4uski]

It’s not about what they want. It’s to provide for them long term. The money inherited from a traditional IRA account is not tax free either. And they will get plenty of cash. I’m trying to figure out a way to guarantee it won’t all be squandered or otherwise lost.

I suppose some sort of trust can be used to preserve the inheritance but I thought an annuity might be a consideration as well. Trying to learn the pros/cons.

If you are worried about the kids squandering an inheritance I wonder if you could put your assets in a trust with a provision that the trust purchase a SPIA for each kid when you pass.

The thing is though if the kids really want cash now they could then sell the SPIA cash flows for cash to an outfit like J.G. Wentorth so there is only so much that you can do. Even if they kept the SPIA they could splurge on things using debt and use the SPIA acashflows to pay off the debt.

You can lead a horse to water... but you can't make him drink.

 

[Bruno]

Cash from your stock account would be tax-free unlike an annuity payout..

Can you explain how your stock account would be Tax-Free? Are you talking if its in a Roth?

 

[MarieIG]

https://www.immediateannuities.com/...nuities-can-offer-spendthrift-protection.html


https://budgeting.thenest.com/there-advantages-placing-annuities-living-trust-33958.html

It appears as if the devil is in the details. You would want to avoid the kiddos becoming the owners of the annuities after you die; just the beneficiaries.

I would consult your estate attorney prior to contacting the insurer so you know how to frame your request; and also have your attorney on tap to review the contract.

 

[marinauser]

I suspect that the thought that a stock account would transfer tax free would be that it would not be in a traditional IRA and in a taxable account that, with the stepped up basis, would be free of any capital gains tax. Many people with signifiant assets in a taxable account hold all or most of the equities in the taxable account to avoid pre-retirement taxes on the interest of bonds (which are held in tax deferred accounts).