Wednesday, August 25, 2004
Recent Client question? www.legacyannuities.com
What is the difference from a Bank CD and a CD Type Annuity?
THERE ARE TWO TYPES OF CERTIFICATES OF DEPOSIT AVAILABLE1) Bank Certificates (CDs)As you well know, rates on CDs are continually changing due to various market conditions. When you purchase a standard CD with a set term such as maturity date, early withdrawal penalty, etc., your options are fixed and non-flexible. The longer term CD that pays periodic interest payments is known as a periodic CD. A CD that pays at maturity is known as an interest at maturity CD.Most people put their savings in bank CDs because it is FDIC insured. Little do they realize the cost they are paying for this coverage. One out of every three year's interest goes to taxes, plus all the other "catches" the bank attaches to your CDs. 2) Insurance company Annuity Certificates (Annuities)Annuity Certificates are only issued by insurance companies. Annuity Certificates are safe and guaranteed by their reserves, billions of assets, by the world's largest life insurance companies. With an annuity certificate you get to keep the money you would normally pay Uncle Sam in taxes and draw interest on that money until you choose to pay taxes on the interest! This gives you triple compounding of your money. Interest on the principle, interest on the tax savings and interest on the interest. This is something bank CDs can't do! Other advantages of an annuity: 1. Tax-deferral, so potentially, you can earn more.2. No "renewable" surrender charges, as in a CD.3. You can avoid probate unlike a CD.4. Free annual withdrawal provisions.5. Waiver of surrender charges at death or due to confinement in a nursing home.6. Annuity interest rates are usually higher than CDs. Why insurance companies are safe:1. 100% + reserves required by law.2. Nature of reserves is highly regulated.3. Reserves are checked through state audits.4. Insurance company promises are backed by all the assets of the company.5. Insurance company insolvencies are rare.
Most annuity certificates are purchased from captive insurance agents who offer limited fixed annuities. Most CDs are purchased from bank representatives with little investment and planning expertise. We offer a wide range of annuity certificates from a long list of the top companies in the industry. We also work to find the bank certificate that suits you and your financial needs. We also continually monitor the financial market and provide you with up to date information. We would be glad to assist you, whether you are considering an investment at this time, or if you already own an Annuity, IRA or bank CD and simply need someone to answer your questions or to see if you can upgrade your current interest rate. We are also qualified to help you look at the big picture, ensuring that any Annuity, IRA or CD you own makes sense from a taxation, planning and investment standpoint.
What is the difference from a Bank CD and a CD Type Annuity?
THERE ARE TWO TYPES OF CERTIFICATES OF DEPOSIT AVAILABLE1) Bank Certificates (CDs)As you well know, rates on CDs are continually changing due to various market conditions. When you purchase a standard CD with a set term such as maturity date, early withdrawal penalty, etc., your options are fixed and non-flexible. The longer term CD that pays periodic interest payments is known as a periodic CD. A CD that pays at maturity is known as an interest at maturity CD.Most people put their savings in bank CDs because it is FDIC insured. Little do they realize the cost they are paying for this coverage. One out of every three year's interest goes to taxes, plus all the other "catches" the bank attaches to your CDs. 2) Insurance company Annuity Certificates (Annuities)Annuity Certificates are only issued by insurance companies. Annuity Certificates are safe and guaranteed by their reserves, billions of assets, by the world's largest life insurance companies. With an annuity certificate you get to keep the money you would normally pay Uncle Sam in taxes and draw interest on that money until you choose to pay taxes on the interest! This gives you triple compounding of your money. Interest on the principle, interest on the tax savings and interest on the interest. This is something bank CDs can't do! Other advantages of an annuity: 1. Tax-deferral, so potentially, you can earn more.2. No "renewable" surrender charges, as in a CD.3. You can avoid probate unlike a CD.4. Free annual withdrawal provisions.5. Waiver of surrender charges at death or due to confinement in a nursing home.6. Annuity interest rates are usually higher than CDs. Why insurance companies are safe:1. 100% + reserves required by law.2. Nature of reserves is highly regulated.3. Reserves are checked through state audits.4. Insurance company promises are backed by all the assets of the company.5. Insurance company insolvencies are rare.
Most annuity certificates are purchased from captive insurance agents who offer limited fixed annuities. Most CDs are purchased from bank representatives with little investment and planning expertise. We offer a wide range of annuity certificates from a long list of the top companies in the industry. We also work to find the bank certificate that suits you and your financial needs. We also continually monitor the financial market and provide you with up to date information. We would be glad to assist you, whether you are considering an investment at this time, or if you already own an Annuity, IRA or bank CD and simply need someone to answer your questions or to see if you can upgrade your current interest rate. We are also qualified to help you look at the big picture, ensuring that any Annuity, IRA or CD you own makes sense from a taxation, planning and investment standpoint.
Recent Client question? www.legacyannuities.com
******ALWAYS SEEK ADVICE FROM a LOCAL ELDER CARE ATTORNEY WHEN IMPLEMENTING MEDICAID STRAREGIES********
How do I Protect MY Assets from Medicaid?
"For one out of two people it's not the memory that's first to go...it's the money."
INTRODUCTION
What would you do if you, your spouse, or a parent had to enter a long-term nursing facility? How would you pay this expense? Most Americans assume that Medicare will pay for an extended nursing home stay. This is completely wrong. Medicare is a health insurance program. It is not a long-term nursing home expense program. If you have any assets, such as bank CDs, property, stocks, bonds, or receive a pension or Social Security check, you are held responsible for paying this expense. With the average yearly cost being $40,000 how long could you make such payments?
In order for Medicaid to step in and pay, you must go through most of your personal assets. In other words, you must be virtually penniless before the government will help. All of your hard-earned assets can literally evaporate before your eyes. Assets that you intended to live on or pass on to your children or grandchildren will no longer be available. This is a brutal, devastating fact, but very true. Just ask anyone who has gone through this terrible experience.
Can you do anything to prevent this from happening? The answer is yes. Because of the vast complexity of the Medicaid subject, we cannot possibly discuss all of the endless details. Our goal is to enlighten you about the subject of Medicaid and provide information on some of the methods you can use to protect your assets. Proper planning done on a timely basis is absolutely critical. The important point to remember is that your planning must begin TODAY if you want to protect your assets. I can guarantee you that you stand to lose much of what you own without doing the proper planning NOW! Don't wait until it's too late and then try to prevent the loss of your assets. Late planning is the same as no planning. Your assets can and will be taken!
WHAT IS MEDICAID?
Medicaid is a Government assistance program started in the 1960's. It was designed to provide health care for poor people of all ages. You must be nearly broke to receive any assistance.
Every state has its own Medicaid rules. However, in order to apply for Medicaid assistance, you are required by each state to disclose all of your assets and income sources. It is at this point that a decision regarding your eligibility is made. If your assets exceed $2,000, you are usually held responsible for your long term nursing care expense.
MEDICAID QUALIFICATIONS
In general, to qualify for assistance an individual must:
1) Be an U.S. citizen or permanent resident.
2) Be at least 65 years of age.
3) Need the type of care provided only in a "nursing home."
4) Meet a state's income and expense requirements.
Medicaid is a welfare program and anyone applying cannot retain any significant assets and still qualify. You cannot give away your assets the day before you enter a nursing home and qualify for aid. Medicaid is allowed to "look back" three to five years to determine if you transferred assets for less than market value. If such transfers were made, you will be required to pay your expenses.
WHAT INCOME CAN YOU HAVE?
Every state has its own rules regarding what income you can receive and still qualify for Medicaid. The general rule is that the applicant's monthly income must be less than the nursing home's monthly rate. A Medicaid recipient must turn over all income received, minus a few allowable deductions, to a nursing home. This includes pension payments and Social Security benefits plus other sources of income.
ASSET ELIGIBILITY
This is the most difficult test to overcome to be eligible for Medicaid assistance. Many qualify on the basis of monthly income, but cannot qualify because they own too many assets. Many individuals hold a good portion of their assets in CDs, passbook accounts, or money market accounts. Some also have stocks, bonds and other investments. All of this will disqualify an applicant for Medicaid assistance. Most individuals must spend down (use their personal assets to pay nursing home costs) to an amount around $2,000 before they can receive Medicaid assistance. In other words, you must basically be broke before Medicaid will help you.
Many individuals have tried to give away assets to others, such as children, to appear artificially poor. Medicaid is well aware of this trick and uses the 36-month "look-back" period previously discussed. If a trust was setup, the look back period is extended to sixty months (five years.)
THE SPOUSAL IMPOVERISHMENT RULE
Many people think that as long as one spouse is healthy all of their assets are protected. This is not true. The Spousal Impoverishment Act does allow all the non nursing home resident to retain certain community property, such as the primary residence. Amounts allowed vary from state to state with some as low as $20,000. The non nursing home resident can also be permitted a small monthly living allowance, but usually just enough to cover basic living expenses.
NEED FOR PROPER PLANNING
The need for proper planning is critical when dealing with the subject of Medicaid. Without it, all of your assets could disappear in a matter of just a few months.
YOUR PLANNING OPTIONS
TRANSFER TO SPOUSES
Individuals can transfer certain assets to the non-confined spouse within certain limits. This may be effective in the short term, but it provides no protection should the non confined spouse die or go into a nursing home. This type of planning should never be relied on as a long-term solution.
GIFTS TO CHILDREN
Assets can be transferred to children, but the thirty-six or sixty month "look-back" periods will apply. If it is determined that assets were gifted within the thirty-six month period (sixty months for trusts) the assets will be treated as though they belonged to the Medicaid applicant, eligibility will be denied and you will be required to pay for your care.
In practice we have found that many parents reject the gifting option because they do not want to give up control of their assets to their children or consider their children too unreliable to handle such responsibility.
RELY ON YOUR SPOUSE OR FAMILY TO TAKE CARE OF YOU
This is an option. However, the question is, do you really want them to? Can they commit full time 24 hours per day for your care? Will they be willing to? What if they are no longer here? The fact is that this is not a practical option. Proper planning can preserve your independence and help relieve the financial and emotional burden on your family.
CREATION OF TRUSTS
A typical living trust is revocable and since the trust grantor has full access to the living trust funds, living trusts will NOT protect assets from Medicaid. The living trust income and assets are considered available to the applicant for Medicaid assistance and could result in denial of assistance.
An "irrevocable" income only trust could protect the trust principal from Medicaid. However, remember that with the creation of a trust, Medicaid will use the sixty-month "look-back" period to determine exactly when the trust was created. Due to the lengthy "look-back" period, very few individuals take advantage of this type of planning. Use of trusts can be useful in Medicaid planning. However, this involves a substantial amount of foresight to have the trust considered as an exempt asset. This can be useful when a spouse has a slow developing degenerative disease, but could be worthless in the event of a sudden stroke or other illness.
The two distinct disadvantages with the creation of trusts are the need for planning several years ahead (to circumvent the five-year "look-back" period) and the need to employ competent legal counsel in creating a trust, could prove to be an extremely expensive undertaking.
PURCHASES OF ANNUITIES
The purchase of annuities can be a useful Medicaid planning tool. However, the purchase must be made before the "look-back" period begins. Also, the expected return from the annuity must be greater than the original amount paid for the annuity. If both criteria are met, this will be considered an allowable transfer and will not be countable for Medicaid purposes.
USE OF LIFE ESTATES IN REAL ESTATE TRANSACTIONS
A life-estate (or life-interest) is an interesting real or personal property that is limited to the life of the person designated to have this right. Upon the death of the person the life-interest is lost. Usually the states do not treat the life-estate as an available asset. However, a lien may be filed on real property. States are increasingly being pressured by the Federal government to recoup as many Medicaid dollars as possible. What is happening is that more and more states are placing liens on property placed in life-estates after Medicaid recipients pass away in order to try to recoup some or all of the Medicaid dollars spent on the deceased.
PURCHASE OF A LONG TERM CARE POLICY
One of the most advantageous and cost effective methods of planning for a long-term care confinement in a nursing home is the use of the long-term care policy. The benefit of using these policies is that it does not require that ANY control over assets be relinquished.
Various types of policies are available for long term nursing care and asset protection. The traditional policy allows you to select the coverage period desired in exchange for a specific annual premium. While these policies used to be extremely expensive, they have decreased in cost due to more companies making such care available. You can now protect a substantial portion of your estate for comparatively little expense in comparison to the estate.
A new type of long term care policy is now available through what is called a combination life and long term care policy. This allows an individual to make a single deposit by shifting a part of his or her savings into the policy. These policies offer benefit values significantly larger than the initial deposit plus long term care benefits in the event the individual needs to enter a long-term care facility. Additionally, the values increase free of taxation.
The newer type of policy offers significant advantages over investing in traditional CDs. For example, if you had $100,000 invested in CDs earning 5%, you would only be earning about 3% after taxes. In such a case you have absolutely no protection from Medicaid and are paying taxes on the interest earned. With the new combination life-long term care policies there are no taxes being paid on the increase in cash value. Secondly, the policy provides a death benefit that is also tax-free. Existing policies with cash values could be exchanged for the newer policy without any tax consequences or out of pocket expenses. Additionally, the policy provides long term health care if the client should need it. Looking at it another way, the long term care coverage, the ultimate asset protector, is being provided free. This is probably the easiest way to protect your assets and is worth thorough consideration in establishing your Medicaid asset protection plan.
Long term care insurance should be an integral part of your insurance package. Let's look at the odds that you will use your different insurance coverages:
1. House insurance (1 in 1,200) cost = $500-$1,500 yearly
2. Car Insurance (1 in 240) cost = $500-$2,500 yearly
3. Health insurance (1 in 15) cost = $1,500-$5,00 yearly
4. Long term care insurance (1-2)* cost = ?
*According to the Wall Street Journal, 7 out of 10 couples now reaching age 65 can expect one partner to be confined in a nursing home.
THE FUTURE OF MEDICAID
Almost every day you see newspaper articles and newscasts regarding the issue of Medicaid. As time goes by, the Government will make it increasingly more difficult to qualify for assistance. In time, such items as "look-back" periods will be increased and most, if not all, legal loopholes available for dealing with the Medicaid issue will be closed. You have a choice. Take action NOW and protect your assets or run the risk of losing everything you own to Medicaid by doing nothing. Contact Medicaid to find out about the program. Discuss the subject with relatives, neighbors, and friends who have had to deal with this nightmare. After doing so, take action to protect as much as you can. Whatever you do, DO NOT delay in putting your asset protection plan together. A delay of just a few days could make all the difference in the world.
THE NEXT STEP
1. Meet with a competent professional.
2. Analyze your situation.
3. Consider the best options.
4. Implement the plan.
Do not lose everything it took a lifetime to create!
******ALWAYS SEEK ADVICE FROM a LOCAL ELDER CARE ATTORNEY WHEN IMPLEMENTING MEDICAID STRAREGIES********
How do I Protect MY Assets from Medicaid?
"For one out of two people it's not the memory that's first to go...it's the money."
INTRODUCTION
What would you do if you, your spouse, or a parent had to enter a long-term nursing facility? How would you pay this expense? Most Americans assume that Medicare will pay for an extended nursing home stay. This is completely wrong. Medicare is a health insurance program. It is not a long-term nursing home expense program. If you have any assets, such as bank CDs, property, stocks, bonds, or receive a pension or Social Security check, you are held responsible for paying this expense. With the average yearly cost being $40,000 how long could you make such payments?
In order for Medicaid to step in and pay, you must go through most of your personal assets. In other words, you must be virtually penniless before the government will help. All of your hard-earned assets can literally evaporate before your eyes. Assets that you intended to live on or pass on to your children or grandchildren will no longer be available. This is a brutal, devastating fact, but very true. Just ask anyone who has gone through this terrible experience.
Can you do anything to prevent this from happening? The answer is yes. Because of the vast complexity of the Medicaid subject, we cannot possibly discuss all of the endless details. Our goal is to enlighten you about the subject of Medicaid and provide information on some of the methods you can use to protect your assets. Proper planning done on a timely basis is absolutely critical. The important point to remember is that your planning must begin TODAY if you want to protect your assets. I can guarantee you that you stand to lose much of what you own without doing the proper planning NOW! Don't wait until it's too late and then try to prevent the loss of your assets. Late planning is the same as no planning. Your assets can and will be taken!
WHAT IS MEDICAID?
Medicaid is a Government assistance program started in the 1960's. It was designed to provide health care for poor people of all ages. You must be nearly broke to receive any assistance.
Every state has its own Medicaid rules. However, in order to apply for Medicaid assistance, you are required by each state to disclose all of your assets and income sources. It is at this point that a decision regarding your eligibility is made. If your assets exceed $2,000, you are usually held responsible for your long term nursing care expense.
MEDICAID QUALIFICATIONS
In general, to qualify for assistance an individual must:
1) Be an U.S. citizen or permanent resident.
2) Be at least 65 years of age.
3) Need the type of care provided only in a "nursing home."
4) Meet a state's income and expense requirements.
Medicaid is a welfare program and anyone applying cannot retain any significant assets and still qualify. You cannot give away your assets the day before you enter a nursing home and qualify for aid. Medicaid is allowed to "look back" three to five years to determine if you transferred assets for less than market value. If such transfers were made, you will be required to pay your expenses.
WHAT INCOME CAN YOU HAVE?
Every state has its own rules regarding what income you can receive and still qualify for Medicaid. The general rule is that the applicant's monthly income must be less than the nursing home's monthly rate. A Medicaid recipient must turn over all income received, minus a few allowable deductions, to a nursing home. This includes pension payments and Social Security benefits plus other sources of income.
ASSET ELIGIBILITY
This is the most difficult test to overcome to be eligible for Medicaid assistance. Many qualify on the basis of monthly income, but cannot qualify because they own too many assets. Many individuals hold a good portion of their assets in CDs, passbook accounts, or money market accounts. Some also have stocks, bonds and other investments. All of this will disqualify an applicant for Medicaid assistance. Most individuals must spend down (use their personal assets to pay nursing home costs) to an amount around $2,000 before they can receive Medicaid assistance. In other words, you must basically be broke before Medicaid will help you.
Many individuals have tried to give away assets to others, such as children, to appear artificially poor. Medicaid is well aware of this trick and uses the 36-month "look-back" period previously discussed. If a trust was setup, the look back period is extended to sixty months (five years.)
THE SPOUSAL IMPOVERISHMENT RULE
Many people think that as long as one spouse is healthy all of their assets are protected. This is not true. The Spousal Impoverishment Act does allow all the non nursing home resident to retain certain community property, such as the primary residence. Amounts allowed vary from state to state with some as low as $20,000. The non nursing home resident can also be permitted a small monthly living allowance, but usually just enough to cover basic living expenses.
NEED FOR PROPER PLANNING
The need for proper planning is critical when dealing with the subject of Medicaid. Without it, all of your assets could disappear in a matter of just a few months.
YOUR PLANNING OPTIONS
TRANSFER TO SPOUSES
Individuals can transfer certain assets to the non-confined spouse within certain limits. This may be effective in the short term, but it provides no protection should the non confined spouse die or go into a nursing home. This type of planning should never be relied on as a long-term solution.
GIFTS TO CHILDREN
Assets can be transferred to children, but the thirty-six or sixty month "look-back" periods will apply. If it is determined that assets were gifted within the thirty-six month period (sixty months for trusts) the assets will be treated as though they belonged to the Medicaid applicant, eligibility will be denied and you will be required to pay for your care.
In practice we have found that many parents reject the gifting option because they do not want to give up control of their assets to their children or consider their children too unreliable to handle such responsibility.
RELY ON YOUR SPOUSE OR FAMILY TO TAKE CARE OF YOU
This is an option. However, the question is, do you really want them to? Can they commit full time 24 hours per day for your care? Will they be willing to? What if they are no longer here? The fact is that this is not a practical option. Proper planning can preserve your independence and help relieve the financial and emotional burden on your family.
CREATION OF TRUSTS
A typical living trust is revocable and since the trust grantor has full access to the living trust funds, living trusts will NOT protect assets from Medicaid. The living trust income and assets are considered available to the applicant for Medicaid assistance and could result in denial of assistance.
An "irrevocable" income only trust could protect the trust principal from Medicaid. However, remember that with the creation of a trust, Medicaid will use the sixty-month "look-back" period to determine exactly when the trust was created. Due to the lengthy "look-back" period, very few individuals take advantage of this type of planning. Use of trusts can be useful in Medicaid planning. However, this involves a substantial amount of foresight to have the trust considered as an exempt asset. This can be useful when a spouse has a slow developing degenerative disease, but could be worthless in the event of a sudden stroke or other illness.
The two distinct disadvantages with the creation of trusts are the need for planning several years ahead (to circumvent the five-year "look-back" period) and the need to employ competent legal counsel in creating a trust, could prove to be an extremely expensive undertaking.
PURCHASES OF ANNUITIES
The purchase of annuities can be a useful Medicaid planning tool. However, the purchase must be made before the "look-back" period begins. Also, the expected return from the annuity must be greater than the original amount paid for the annuity. If both criteria are met, this will be considered an allowable transfer and will not be countable for Medicaid purposes.
USE OF LIFE ESTATES IN REAL ESTATE TRANSACTIONS
A life-estate (or life-interest) is an interesting real or personal property that is limited to the life of the person designated to have this right. Upon the death of the person the life-interest is lost. Usually the states do not treat the life-estate as an available asset. However, a lien may be filed on real property. States are increasingly being pressured by the Federal government to recoup as many Medicaid dollars as possible. What is happening is that more and more states are placing liens on property placed in life-estates after Medicaid recipients pass away in order to try to recoup some or all of the Medicaid dollars spent on the deceased.
PURCHASE OF A LONG TERM CARE POLICY
One of the most advantageous and cost effective methods of planning for a long-term care confinement in a nursing home is the use of the long-term care policy. The benefit of using these policies is that it does not require that ANY control over assets be relinquished.
Various types of policies are available for long term nursing care and asset protection. The traditional policy allows you to select the coverage period desired in exchange for a specific annual premium. While these policies used to be extremely expensive, they have decreased in cost due to more companies making such care available. You can now protect a substantial portion of your estate for comparatively little expense in comparison to the estate.
A new type of long term care policy is now available through what is called a combination life and long term care policy. This allows an individual to make a single deposit by shifting a part of his or her savings into the policy. These policies offer benefit values significantly larger than the initial deposit plus long term care benefits in the event the individual needs to enter a long-term care facility. Additionally, the values increase free of taxation.
The newer type of policy offers significant advantages over investing in traditional CDs. For example, if you had $100,000 invested in CDs earning 5%, you would only be earning about 3% after taxes. In such a case you have absolutely no protection from Medicaid and are paying taxes on the interest earned. With the new combination life-long term care policies there are no taxes being paid on the increase in cash value. Secondly, the policy provides a death benefit that is also tax-free. Existing policies with cash values could be exchanged for the newer policy without any tax consequences or out of pocket expenses. Additionally, the policy provides long term health care if the client should need it. Looking at it another way, the long term care coverage, the ultimate asset protector, is being provided free. This is probably the easiest way to protect your assets and is worth thorough consideration in establishing your Medicaid asset protection plan.
Long term care insurance should be an integral part of your insurance package. Let's look at the odds that you will use your different insurance coverages:
1. House insurance (1 in 1,200) cost = $500-$1,500 yearly
2. Car Insurance (1 in 240) cost = $500-$2,500 yearly
3. Health insurance (1 in 15) cost = $1,500-$5,00 yearly
4. Long term care insurance (1-2)* cost = ?
*According to the Wall Street Journal, 7 out of 10 couples now reaching age 65 can expect one partner to be confined in a nursing home.
THE FUTURE OF MEDICAID
Almost every day you see newspaper articles and newscasts regarding the issue of Medicaid. As time goes by, the Government will make it increasingly more difficult to qualify for assistance. In time, such items as "look-back" periods will be increased and most, if not all, legal loopholes available for dealing with the Medicaid issue will be closed. You have a choice. Take action NOW and protect your assets or run the risk of losing everything you own to Medicaid by doing nothing. Contact Medicaid to find out about the program. Discuss the subject with relatives, neighbors, and friends who have had to deal with this nightmare. After doing so, take action to protect as much as you can. Whatever you do, DO NOT delay in putting your asset protection plan together. A delay of just a few days could make all the difference in the world.
THE NEXT STEP
1. Meet with a competent professional.
2. Analyze your situation.
3. Consider the best options.
4. Implement the plan.
Do not lose everything it took a lifetime to create!
Recent client question? www.legacyannuities.com
How do I Diffuse the Coming Taxes on my Tax-Deferred Annuity?
As an annuity owner, you purchased your annuity with certain common goals in mind:
1. Safety of Principle
2. Tax Advantaged Compounding
3. To Avoid Probate
4. Possible Passing of Annuities to Heirs
5. Maximize After-Tax Account Values
6. To Create Future Income
The Problem
As your account values grow, you are increasing the taxable gain due in the future when you either need income, or upon your death. According to the Tax Code, all gains in an annuity contract are taxable upon redemption or death. The only exception to defraying the taxable gain is if you pass the annuity to your surviving spouse. This can create an even bigger tax trap when your spouse dies. In addition to income taxes, the deferred gain and the principle may also be subject to estate taxes. Without proper tax planning and estate planning, the taxes will come due all at once, therefore subjecting you or your estate to the maximum tax brackets. As time goes on, the tax problems compound.
The Solution
Due to a little known provision in the Tax Code, an annuity owner can change the character of future accumulations to provide tax-free income and a tax-free benefit to their heirs and still have safety of principle and avoid probate. Unfortunately, the gains you have accumulated to date in your annuity cannot avoid income taxation. However, you can greatly lower these income taxes through proper tax planning. The key to solving the tax timebomb dilemma is to change the nature of the accumulation to a tax-free status before the problem gets worse.
Some of the IRS exemptions that may apply to your situation are:
1. The exclusion ratio rule which allows regular distributions from an annuity contract to be mostly tax-free.
2. The establishment of little known trusts to avoid estate taxes.
3. The use of special insurance contracts that provide for both tax-free income and tax-free benefits to heirs.
4. Gifting strategies to reduce or eliminate income taxes and estate taxes.
How do I Diffuse the Coming Taxes on my Tax-Deferred Annuity?
As an annuity owner, you purchased your annuity with certain common goals in mind:
1. Safety of Principle
2. Tax Advantaged Compounding
3. To Avoid Probate
4. Possible Passing of Annuities to Heirs
5. Maximize After-Tax Account Values
6. To Create Future Income
The Problem
As your account values grow, you are increasing the taxable gain due in the future when you either need income, or upon your death. According to the Tax Code, all gains in an annuity contract are taxable upon redemption or death. The only exception to defraying the taxable gain is if you pass the annuity to your surviving spouse. This can create an even bigger tax trap when your spouse dies. In addition to income taxes, the deferred gain and the principle may also be subject to estate taxes. Without proper tax planning and estate planning, the taxes will come due all at once, therefore subjecting you or your estate to the maximum tax brackets. As time goes on, the tax problems compound.
The Solution
Due to a little known provision in the Tax Code, an annuity owner can change the character of future accumulations to provide tax-free income and a tax-free benefit to their heirs and still have safety of principle and avoid probate. Unfortunately, the gains you have accumulated to date in your annuity cannot avoid income taxation. However, you can greatly lower these income taxes through proper tax planning. The key to solving the tax timebomb dilemma is to change the nature of the accumulation to a tax-free status before the problem gets worse.
Some of the IRS exemptions that may apply to your situation are:
1. The exclusion ratio rule which allows regular distributions from an annuity contract to be mostly tax-free.
2. The establishment of little known trusts to avoid estate taxes.
3. The use of special insurance contracts that provide for both tax-free income and tax-free benefits to heirs.
4. Gifting strategies to reduce or eliminate income taxes and estate taxes.
Monday, August 23, 2004
Recent client questions? www.legacyannuities.com
FIXED ANNUITIES
“I’d rather keep my money safe in the bank than turn it over to an insurance company.”
Although their money is FDIC insured in the bank, that insurance only covers $100,000 in a specified account. And while banks are not required to keep the face amounts of all their deposits on hand, many state insurance regulators require that insurance companies maintain reserves that either match or exceed the principal of the annuity. What’s more, insurance companies operate under a system that is highly regulated, minimizing the chances of an insurance company failure.
“I don’t want to tie up my money in an annuity. What if I need that money in an emergency?”
Both CDs and annuities have penalties for early surrender, but many annuities allow for monthly, quarterly, semi-annual or annual withdrawals as long as the year-end withdrawal total does not exceed more than 10 percent of the annuity’s accumulated value. CDs provide a small window each year when funds can be withdrawn without penalties. If the money is not withdrawn during the annual window, the funds are automatically put back into the CD and the penalty period starts anew.
VARIABLE ANNUITIES
“I’d rather put my money into a mutual fund.”
While both variable annuities and mutual funds share some of the same benefits, such as growth potential, professional money management, and investment variety, some variable annuities offer more flexibility when re-allocating assets among subaccounts. Investors can often shift money around variable annuity subaccounts without triggering taxes, whereas similar moves with mutual funds held outside qualified accounts will incur taxes.
Equity Indexed Annuities
“I don’t want to limit my return, especially now that the stock market is rising”
Risk is commensurate with reward. “Are you prepared to lose half of your money tomorrow?” If they hesitate, they are likely more risk adverse than they realize and may appreciate the peace of mind of knowing that with an EIA, a negative annual return in the market becomes zero (for annual crediting methods).
www.legacyannuities.com
FIXED ANNUITIES
“I’d rather keep my money safe in the bank than turn it over to an insurance company.”
Although their money is FDIC insured in the bank, that insurance only covers $100,000 in a specified account. And while banks are not required to keep the face amounts of all their deposits on hand, many state insurance regulators require that insurance companies maintain reserves that either match or exceed the principal of the annuity. What’s more, insurance companies operate under a system that is highly regulated, minimizing the chances of an insurance company failure.
“I don’t want to tie up my money in an annuity. What if I need that money in an emergency?”
Both CDs and annuities have penalties for early surrender, but many annuities allow for monthly, quarterly, semi-annual or annual withdrawals as long as the year-end withdrawal total does not exceed more than 10 percent of the annuity’s accumulated value. CDs provide a small window each year when funds can be withdrawn without penalties. If the money is not withdrawn during the annual window, the funds are automatically put back into the CD and the penalty period starts anew.
VARIABLE ANNUITIES
“I’d rather put my money into a mutual fund.”
While both variable annuities and mutual funds share some of the same benefits, such as growth potential, professional money management, and investment variety, some variable annuities offer more flexibility when re-allocating assets among subaccounts. Investors can often shift money around variable annuity subaccounts without triggering taxes, whereas similar moves with mutual funds held outside qualified accounts will incur taxes.
Equity Indexed Annuities
“I don’t want to limit my return, especially now that the stock market is rising”
Risk is commensurate with reward. “Are you prepared to lose half of your money tomorrow?” If they hesitate, they are likely more risk adverse than they realize and may appreciate the peace of mind of knowing that with an EIA, a negative annual return in the market becomes zero (for annual crediting methods).
www.legacyannuities.com
Friday, August 20, 2004
Recent client question? www.legacyannuities.com
What are the MOST COMMON MISTAKES MADE BY ANNUITY INVESTORS?
Mistake #1: Lack of Concern for Quality of CompanyMany annuity investors fail to properly research the ratings of the insurance company issuing their annuity contract. Annuity owners commonly fail to keep updated on the company after they have made an investment. This is especially important with a fixed annuity because the insurance company has your money invested in their general account and guarantee both the principal and interest. In a variable annuity it is not nearly as important since the money is in separate accounts invested according to the stated objective of the sub-account (i.e. growth, balanced, international, bonds, etc.)A.M. Best can no longer be relied upon as the number one authority in rating insurance companies. We rely more on Standard & Poors, Moody, Duff & Phelps and Weiss rating services in addition to analyzing the companies' investment portfolio. Our recommendation is to buy only from top-rated insurers.If you would like a review of the ratings and ranking of your annuity company, please call us.
Mistake #2: Annuitizing the ContractIn most older annuity contracts, when it comes time to start receiving income you are forced into making a decision on what terms you want to annuitize under. Some options can be very unfavorable to the investor. For example, if you choose a life annuity that pays you a monthly check as long as you live and you die prematurely, the insurance company gets to keep the remainder of the funds, and your heirs get nothing.Another drawback of annuitization is that you lose control of your money. Once you annuitize you cannot go back and increase or decrease the amount of your monthly check. This could be a serious problem if your annuity income does not keep pace with inflation.Newer annuities offer an option called systematic withdrawal. This means you can set up your own schedule of monthly income that can be adjusted at any time. The remainder of your funds will continue to earn interest and when you die the funds go to your beneficiary, without the cost of delay or probate.
Mistake #3: Falling for High First Year Rates and Not Being Concerned with Renewal RatesMany insurance companies will try to entice you into purchasing their annuity by offering a first year rate that is much higher than the going rate. After the first year the renewal rate will typically be much lower, but you will still have several years of surrender charges before you can move your money to another annuity. Approach unusually high rates with caution. Many high interest rate annuities have surrender charges that are no longer than the normal 5 to 7 years and in some cases the surrender charges never go away. Avoid these annuities and any other that restrict your withdrawals by giving you a lower rate if you move your money or don't annuitize with them.Before you buy, look at the interest rate protection features and consider an annuity where you have the option to lock rates in for more than one year. Also, if you already own an annuity, make it a point to have your renewal rate reviewed each year by an unbiased annuity professional. Your annuity may have a bailout feature that allows you to move your money if the rate drops below a specific level. The annuity company will not notify you that the bailout feature has been triggered. We can research this for you so you can make an intelligent decision. Mistake
#4: Purchasing an Annuity with Limited Investment OptionsThe days of annuities only offering a one-year rate, or a handful of variable accounts from a single investment manager, are long gone. Today's annuities offer rate guarantee periods from one to ten years, and up to 30 different investment portfolios from as many as 14 fund managers. With the newer types of tax deferred annuities you can adjust your asset allocations as markets change and interest rates change. This type of investment program can meet your investment needs as your age and your investment objective change.
Mistake #5: Failing to Properly Designate Ownership, Annuitants and BeneficiariesUnless you are well versed in IRS rules concerning ownership, annuitant designation or beneficiary designation, you could cause needless problems in transfer, unnecessary taxable income, and failure to continue income tax deferral and excess payment of estate taxes. For example, many people do not realize that once you name an annuitant, the IRS will not allow you to change that designation. This could result in a 10% tax penalty on the income if the annuitant were to need income, and was under age 59 1/2. Another common mistake is to name a trust as the beneficiary. This would cause the proceeds to become immediately taxable, rather than allowing your spouse continuous tax deferral for up to an additional five years.
Mistake #6: Not Using A Full Time Annuity SpecialistMost annuity investments are purchased from captive insurance agents who offer limited fixed annuities, or from banks with little investment and planning expertise. We offer a wide range of annuity investments from a long list of the top companies in the industry. We will work with you to find the investment that suits you and your financial needs. We also continually monitor the market and provide you with up to date information. We would be glad to assist you, whether you are considering an investment at this time, or if you already own an annuity and simply need someone to answer your questions. We are also qualified to help you look at the big picture, ensuring that any annuity purchase makes sense from a taxation, planning and investment standpoint.
www.legacyannuities.com
What are the MOST COMMON MISTAKES MADE BY ANNUITY INVESTORS?
Mistake #1: Lack of Concern for Quality of CompanyMany annuity investors fail to properly research the ratings of the insurance company issuing their annuity contract. Annuity owners commonly fail to keep updated on the company after they have made an investment. This is especially important with a fixed annuity because the insurance company has your money invested in their general account and guarantee both the principal and interest. In a variable annuity it is not nearly as important since the money is in separate accounts invested according to the stated objective of the sub-account (i.e. growth, balanced, international, bonds, etc.)A.M. Best can no longer be relied upon as the number one authority in rating insurance companies. We rely more on Standard & Poors, Moody, Duff & Phelps and Weiss rating services in addition to analyzing the companies' investment portfolio. Our recommendation is to buy only from top-rated insurers.If you would like a review of the ratings and ranking of your annuity company, please call us.
Mistake #2: Annuitizing the ContractIn most older annuity contracts, when it comes time to start receiving income you are forced into making a decision on what terms you want to annuitize under. Some options can be very unfavorable to the investor. For example, if you choose a life annuity that pays you a monthly check as long as you live and you die prematurely, the insurance company gets to keep the remainder of the funds, and your heirs get nothing.Another drawback of annuitization is that you lose control of your money. Once you annuitize you cannot go back and increase or decrease the amount of your monthly check. This could be a serious problem if your annuity income does not keep pace with inflation.Newer annuities offer an option called systematic withdrawal. This means you can set up your own schedule of monthly income that can be adjusted at any time. The remainder of your funds will continue to earn interest and when you die the funds go to your beneficiary, without the cost of delay or probate.
Mistake #3: Falling for High First Year Rates and Not Being Concerned with Renewal RatesMany insurance companies will try to entice you into purchasing their annuity by offering a first year rate that is much higher than the going rate. After the first year the renewal rate will typically be much lower, but you will still have several years of surrender charges before you can move your money to another annuity. Approach unusually high rates with caution. Many high interest rate annuities have surrender charges that are no longer than the normal 5 to 7 years and in some cases the surrender charges never go away. Avoid these annuities and any other that restrict your withdrawals by giving you a lower rate if you move your money or don't annuitize with them.Before you buy, look at the interest rate protection features and consider an annuity where you have the option to lock rates in for more than one year. Also, if you already own an annuity, make it a point to have your renewal rate reviewed each year by an unbiased annuity professional. Your annuity may have a bailout feature that allows you to move your money if the rate drops below a specific level. The annuity company will not notify you that the bailout feature has been triggered. We can research this for you so you can make an intelligent decision. Mistake
#4: Purchasing an Annuity with Limited Investment OptionsThe days of annuities only offering a one-year rate, or a handful of variable accounts from a single investment manager, are long gone. Today's annuities offer rate guarantee periods from one to ten years, and up to 30 different investment portfolios from as many as 14 fund managers. With the newer types of tax deferred annuities you can adjust your asset allocations as markets change and interest rates change. This type of investment program can meet your investment needs as your age and your investment objective change.
Mistake #5: Failing to Properly Designate Ownership, Annuitants and BeneficiariesUnless you are well versed in IRS rules concerning ownership, annuitant designation or beneficiary designation, you could cause needless problems in transfer, unnecessary taxable income, and failure to continue income tax deferral and excess payment of estate taxes. For example, many people do not realize that once you name an annuitant, the IRS will not allow you to change that designation. This could result in a 10% tax penalty on the income if the annuitant were to need income, and was under age 59 1/2. Another common mistake is to name a trust as the beneficiary. This would cause the proceeds to become immediately taxable, rather than allowing your spouse continuous tax deferral for up to an additional five years.
Mistake #6: Not Using A Full Time Annuity SpecialistMost annuity investments are purchased from captive insurance agents who offer limited fixed annuities, or from banks with little investment and planning expertise. We offer a wide range of annuity investments from a long list of the top companies in the industry. We will work with you to find the investment that suits you and your financial needs. We also continually monitor the market and provide you with up to date information. We would be glad to assist you, whether you are considering an investment at this time, or if you already own an annuity and simply need someone to answer your questions. We are also qualified to help you look at the big picture, ensuring that any annuity purchase makes sense from a taxation, planning and investment standpoint.
www.legacyannuities.com
Recent client question? www.legacyannuities.com
What are the MOST COMMON MISTAKES MADE BY ANNUITY INVESTORS?
Mistake #1: Lack of Concern for Quality of CompanyMany annuity investors fail to properly research the ratings of the insurance company issuing their annuity contract. Annuity owners commonly fail to keep updated on the company after they have made an investment. This is especially important with a fixed annuity because the insurance company has your money invested in their general account and guarantee both the principal and interest. In a variable annuity it is not nearly as important since the money is in separate accounts invested according to the stated objective of the sub-account (i.e. growth, balanced, international, bonds, etc.)A.M. Best can no longer be relied upon as the number one authority in rating insurance companies. We rely more on Standard & Poors, Moody, Duff & Phelps and Weiss rating services in addition to analyzing the companies' investment portfolio. Our recommendation is to buy only from top-rated insurers.If you would like a review of the ratings and ranking of your annuity company, please call us.
Mistake #2: Annuitizing the ContractIn most older annuity contracts, when it comes time to start receiving income you are forced into making a decision on what terms you want to annuitize under. Some options can be very unfavorable to the investor. For example, if you choose a life annuity that pays you a monthly check as long as you live and you die prematurely, the insurance company gets to keep the remainder of the funds, and your heirs get nothing.Another drawback of annuitization is that you lose control of your money. Once you annuitize you cannot go back and increase or decrease the amount of your monthly check. This could be a serious problem if your annuity income does not keep pace with inflation.Newer annuities offer an option called systematic withdrawal. This means you can set up your own schedule of monthly income that can be adjusted at any time. The remainder of your funds will continue to earn interest and when you die the funds go to your beneficiary, without the cost of delay or probate.
Mistake #3: Falling for High First Year Rates and Not Being Concerned with Renewal RatesMany insurance companies will try to entice you into purchasing their annuity by offering a first year rate that is much higher than the going rate. After the first year the renewal rate will typically be much lower, but you will still have several years of surrender charges before you can move your money to another annuity. Approach unusually high rates with caution. Many high interest rate annuities have surrender charges that are no longer than the normal 5 to 7 years and in some cases the surrender charges never go away. Avoid these annuities and any other that restrict your withdrawals by giving you a lower rate if you move your money or don't annuitize with them.Before you buy, look at the interest rate protection features and consider an annuity where you have the option to lock rates in for more than one year. Also, if you already own an annuity, make it a point to have your renewal rate reviewed each year by an unbiased annuity professional. Your annuity may have a bailout feature that allows you to move your money if the rate drops below a specific level. The annuity company will not notify you that the bailout feature has been triggered. We can research this for you so you can make an intelligent decision. Mistake
#4: Purchasing an Annuity with Limited Investment OptionsThe days of annuities only offering a one-year rate, or a handful of variable accounts from a single investment manager, are long gone. Today's annuities offer rate guarantee periods from one to ten years, and up to 30 different investment portfolios from as many as 14 fund managers. With the newer types of tax deferred annuities you can adjust your asset allocations as markets change and interest rates change. This type of investment program can meet your investment needs as your age and your investment objective change.
Mistake #5: Failing to Properly Designate Ownership, Annuitants and BeneficiariesUnless you are well versed in IRS rules concerning ownership, annuitant designation or beneficiary designation, you could cause needless problems in transfer, unnecessary taxable income, and failure to continue income tax deferral and excess payment of estate taxes. For example, many people do not realize that once you name an annuitant, the IRS will not allow you to change that designation. This could result in a 10% tax penalty on the income if the annuitant were to need income, and was under age 59 1/2. Another common mistake is to name a trust as the beneficiary. This would cause the proceeds to become immediately taxable, rather than allowing your spouse continuous tax deferral for up to an additional five years.
Mistake #6: Not Using A Full Time Annuity SpecialistMost annuity investments are purchased from captive insurance agents who offer limited fixed annuities, or from banks with little investment and planning expertise. We offer a wide range of annuity investments from a long list of the top companies in the industry. We will work with you to find the investment that suits you and your financial needs. We also continually monitor the market and provide you with up to date information. We would be glad to assist you, whether you are considering an investment at this time, or if you already own an annuity and simply need someone to answer your questions. We are also qualified to help you look at the big picture, ensuring that any annuity purchase makes sense from a taxation, planning and investment standpoint.
www.legacyannuities.com
What are the MOST COMMON MISTAKES MADE BY ANNUITY INVESTORS?
Mistake #1: Lack of Concern for Quality of CompanyMany annuity investors fail to properly research the ratings of the insurance company issuing their annuity contract. Annuity owners commonly fail to keep updated on the company after they have made an investment. This is especially important with a fixed annuity because the insurance company has your money invested in their general account and guarantee both the principal and interest. In a variable annuity it is not nearly as important since the money is in separate accounts invested according to the stated objective of the sub-account (i.e. growth, balanced, international, bonds, etc.)A.M. Best can no longer be relied upon as the number one authority in rating insurance companies. We rely more on Standard & Poors, Moody, Duff & Phelps and Weiss rating services in addition to analyzing the companies' investment portfolio. Our recommendation is to buy only from top-rated insurers.If you would like a review of the ratings and ranking of your annuity company, please call us.
Mistake #2: Annuitizing the ContractIn most older annuity contracts, when it comes time to start receiving income you are forced into making a decision on what terms you want to annuitize under. Some options can be very unfavorable to the investor. For example, if you choose a life annuity that pays you a monthly check as long as you live and you die prematurely, the insurance company gets to keep the remainder of the funds, and your heirs get nothing.Another drawback of annuitization is that you lose control of your money. Once you annuitize you cannot go back and increase or decrease the amount of your monthly check. This could be a serious problem if your annuity income does not keep pace with inflation.Newer annuities offer an option called systematic withdrawal. This means you can set up your own schedule of monthly income that can be adjusted at any time. The remainder of your funds will continue to earn interest and when you die the funds go to your beneficiary, without the cost of delay or probate.
Mistake #3: Falling for High First Year Rates and Not Being Concerned with Renewal RatesMany insurance companies will try to entice you into purchasing their annuity by offering a first year rate that is much higher than the going rate. After the first year the renewal rate will typically be much lower, but you will still have several years of surrender charges before you can move your money to another annuity. Approach unusually high rates with caution. Many high interest rate annuities have surrender charges that are no longer than the normal 5 to 7 years and in some cases the surrender charges never go away. Avoid these annuities and any other that restrict your withdrawals by giving you a lower rate if you move your money or don't annuitize with them.Before you buy, look at the interest rate protection features and consider an annuity where you have the option to lock rates in for more than one year. Also, if you already own an annuity, make it a point to have your renewal rate reviewed each year by an unbiased annuity professional. Your annuity may have a bailout feature that allows you to move your money if the rate drops below a specific level. The annuity company will not notify you that the bailout feature has been triggered. We can research this for you so you can make an intelligent decision. Mistake
#4: Purchasing an Annuity with Limited Investment OptionsThe days of annuities only offering a one-year rate, or a handful of variable accounts from a single investment manager, are long gone. Today's annuities offer rate guarantee periods from one to ten years, and up to 30 different investment portfolios from as many as 14 fund managers. With the newer types of tax deferred annuities you can adjust your asset allocations as markets change and interest rates change. This type of investment program can meet your investment needs as your age and your investment objective change.
Mistake #5: Failing to Properly Designate Ownership, Annuitants and BeneficiariesUnless you are well versed in IRS rules concerning ownership, annuitant designation or beneficiary designation, you could cause needless problems in transfer, unnecessary taxable income, and failure to continue income tax deferral and excess payment of estate taxes. For example, many people do not realize that once you name an annuitant, the IRS will not allow you to change that designation. This could result in a 10% tax penalty on the income if the annuitant were to need income, and was under age 59 1/2. Another common mistake is to name a trust as the beneficiary. This would cause the proceeds to become immediately taxable, rather than allowing your spouse continuous tax deferral for up to an additional five years.
Mistake #6: Not Using A Full Time Annuity SpecialistMost annuity investments are purchased from captive insurance agents who offer limited fixed annuities, or from banks with little investment and planning expertise. We offer a wide range of annuity investments from a long list of the top companies in the industry. We will work with you to find the investment that suits you and your financial needs. We also continually monitor the market and provide you with up to date information. We would be glad to assist you, whether you are considering an investment at this time, or if you already own an annuity and simply need someone to answer your questions. We are also qualified to help you look at the big picture, ensuring that any annuity purchase makes sense from a taxation, planning and investment standpoint.
www.legacyannuities.com
Friday, August 06, 2004
Recent client question? www.legacyannuities.com
What is a split annuity?
Split Annuities
Income and Capital PreservationA Split Annuity is not an annuity policy but a combination of two annuity products. A single premium immediate annuity and a single premium tax deferred annuity. Structured in such away as to produce immediate income for a guaranteed period of time and to restore you original principal at the end of that time period.
Administration
A Single Premium Annuity is used to restore the original principal at the end of the guaranteed period. The Single Premium Immediate Annuity provides a guaranteed monthly income for the same time period.
Advantages of a Split Annuity
One advantage of a split annuity is that your original principal is restored at the end of the guaranteed period. This allows you to start the process over again at prevailing interest rates. The funds placed in the Single Premium Deferred Annuity policy are available for emergencies with limitations.
Plan LimitationsThe limits place on the use of a split are annuity are the issue ages of the policies, usually age 0-85 for non qualified funds and 0-70 for qualified funds. The immediate income periods range from 3 to 20 years.
Example of a Split Annuity
$100,000
Immediate Annuity$38,430at 6.2%
Deferred Annuity$61,570at 6.25%
Monthly Income$485.37
will growto
Annual Income$5,824.48
Yr. 1 $65,418Yr. 2 $69,507
for 8 yearsfor which
Yr. 3 $73,851Yr. 4 $78,466
82%is not taxed
Yr. 5 $83,371Yr. 6 $88,581
Total Incomebefore Taxes$46,595.83
Yr. 7 $94,118Yr. 8 $100,000Original Principal
Please note that the illustration is based on a guaranteed interest rate of 6.25% for 8 years. Withdrawals from an annuity prior to age 59 1/2 may result in a 10% penalty tax imposed by the IRS. Annuities are not FDIC insured.
What is a split annuity?
Split Annuities
Income and Capital PreservationA Split Annuity is not an annuity policy but a combination of two annuity products. A single premium immediate annuity and a single premium tax deferred annuity. Structured in such away as to produce immediate income for a guaranteed period of time and to restore you original principal at the end of that time period.
Administration
A Single Premium Annuity is used to restore the original principal at the end of the guaranteed period. The Single Premium Immediate Annuity provides a guaranteed monthly income for the same time period.
Advantages of a Split Annuity
One advantage of a split annuity is that your original principal is restored at the end of the guaranteed period. This allows you to start the process over again at prevailing interest rates. The funds placed in the Single Premium Deferred Annuity policy are available for emergencies with limitations.
Plan LimitationsThe limits place on the use of a split are annuity are the issue ages of the policies, usually age 0-85 for non qualified funds and 0-70 for qualified funds. The immediate income periods range from 3 to 20 years.
Example of a Split Annuity
$100,000
Immediate Annuity$38,430at 6.2%
Deferred Annuity$61,570at 6.25%
Monthly Income$485.37
will growto
Annual Income$5,824.48
Yr. 1 $65,418Yr. 2 $69,507
for 8 yearsfor which
Yr. 3 $73,851Yr. 4 $78,466
82%is not taxed
Yr. 5 $83,371Yr. 6 $88,581
Total Incomebefore Taxes$46,595.83
Yr. 7 $94,118Yr. 8 $100,000Original Principal
Please note that the illustration is based on a guaranteed interest rate of 6.25% for 8 years. Withdrawals from an annuity prior to age 59 1/2 may result in a 10% penalty tax imposed by the IRS. Annuities are not FDIC insured.
Recent client question? www.legacyannuities.com
How do Charitable Gift Annuities work?
Charitable Gift Annuities
An individual may make a "gift" or "donation" to a nonprofit or educational origination and in return receive an income for life and multiple tax deductions.
The Gift and Tax Deduction
An individual or couple may fund a charitable gift annuity with cash, marketable securities.
Cash Cash donations to fund a charitable gift annuity entitles you claim a charitable income tax deduction in an amount of up to 50% of your adjusted gross income. If in the year you make the gift and the gift is greater than 50% of you income you may carry the balance forward for up to five years.
Securities Securities used to fund a charitable gift annuity provide the donor with a unique advantage. If the securities have been held for more than one year the charitable income tax dedition is based on the market values of the securities. You may claim a charitable income tax deduction of up to 30% of your adjusted gross income. If in the year you make the gift and the gift is greater than 30% of your income you may carry the balance forward for up to five years.
The Income
Once the gift has been made you can elect to deferrer the income or chose to have it begin immediately.
Guaranteed Income One advantage of a charitable gift annuity is that it creates a guaranteed income at a guaranteed rate of return. Most organizations use the table set by the American Council on Gift Annuities (ACGA) to determine the maximum rate which can be paid to you.
Non Taxable Income Based on your life expectancy a part of each payment for a limited time period is not taxable, this is known as the exclusion allowance.
How do Charitable Gift Annuities work?
Charitable Gift Annuities
An individual may make a "gift" or "donation" to a nonprofit or educational origination and in return receive an income for life and multiple tax deductions.
The Gift and Tax Deduction
An individual or couple may fund a charitable gift annuity with cash, marketable securities.
Cash Cash donations to fund a charitable gift annuity entitles you claim a charitable income tax deduction in an amount of up to 50% of your adjusted gross income. If in the year you make the gift and the gift is greater than 50% of you income you may carry the balance forward for up to five years.
Securities Securities used to fund a charitable gift annuity provide the donor with a unique advantage. If the securities have been held for more than one year the charitable income tax dedition is based on the market values of the securities. You may claim a charitable income tax deduction of up to 30% of your adjusted gross income. If in the year you make the gift and the gift is greater than 30% of your income you may carry the balance forward for up to five years.
The Income
Once the gift has been made you can elect to deferrer the income or chose to have it begin immediately.
Guaranteed Income One advantage of a charitable gift annuity is that it creates a guaranteed income at a guaranteed rate of return. Most organizations use the table set by the American Council on Gift Annuities (ACGA) to determine the maximum rate which can be paid to you.
Non Taxable Income Based on your life expectancy a part of each payment for a limited time period is not taxable, this is known as the exclusion allowance.
Recent client question? www.legacyannuities.com
What happens if an insurance company goes out of business?
Life & Health Guaranty Associations
Most states have guaranty funds to help pay the claims of financially impaired insurance companies. State laws specify the lines of insurance covered by these funds and the dollar limits payable. Coverage is usually for individual policyholders and their beneficiaries and not for values held in unallocated group contracts. Most states also restrict insurance agents and companies from advertising the funds’ availability. There are many issues, too numerous to describe here, which determine the type and extent of coverage available. You are advised to consult your state insurance department for details about any policy you consider purchasing. Another source of information is the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA, 13873 Park Center Road, Suite 329, Herndon, VA 22071). http://www.nolhga.com/stateinformation/main.cfm
Liability LimitsTo visit a particular state insurance department's web site, click on the links provided in the table below.
State
Max. aggregate benefits for all lines of insurance
Max. death benefit with respect to any one life
Max. liability for cash or withdrawal value of life insurance policy
Max. liability for present value of an annuity contract
State Guaranty Association Phone Numbers
Alabama
$300,000
$300,000
$100,000
$100,000
(205) 879-2202
Alaska
$300,000
$300,000
$100,000
$100,000
(907) 243-2311
Arizona
$300,000
$300,000
$100,000
$100,000
(602) 364-3863
Arkansas
$300,000
$300,000
$300,000
$300,000
(501) 378-2961
California
80% not to exceed $250,000
80% not to exceed $250,000
80% not to exceed $100,000
80% not to exceed $100,000
(323) 782-0182
Colorado
$300,000
$300,000
$100,000
$100,000
(303) 292-5022
Connecticut
$300,000
$300,000
$100,000
$100,000
(860) 529-3495
Delaware
$300,000
$300,000
$100,000
$100,000
(302) 456-3656
Dist. of Col.
$300,000
$300,000
$100,000
$300,000
(202) 434-8771
Florida
$300,000
$300,000
$100,000
$100,000
(904) 398-3644
Georgia
$300,000
$300,000
$100,000
$100,000
(770) 621-9835
Hawaii
$300,000
$300,000
$100,000
$100,000
(808) 528-5400
Idaho
$300,000
$300,000
$100,000
$100,000
(208) 378-9510
Illinois
$300,000
$300,000
$100,000
$100,000
(773) 714-8050
Indiana
$300,000
$300,000
$100,000
$100,000
(317) 636-8204
Iowa
$300,000
$300,000
$100,000
$100,000
(515) 283-3163
Kansas
$300,000
$300,000
$100,000
$100,000
(785) 271-1199
Kentucky
$300,000
$300,000
$100,000
$100,000
(502) 895-5915
Louisiana
$300,000
$300,000
$100,000
$100,000
(225) 381-0656
Maine
$300,000
$300,000
$100,000
$100,000
(207) 633-1090
Maryland
$300,000
$300,000
$100,000
$100,000
(410) 998-3907
Massachusetts
$300,000
$300,000
$100,000
$100,000
(413) 744-8483
Michigan
$300,000
$300,000
$100,000
$100,000
(517) 372-3863
Minnesota
$300,000
$300,000
$100,000
$100,000
(651) 407-3149
Mississippi
$300,000
$300,000
$100,000
$100,000
(601) 981-0755
Missouri
$300,000
$300,000
$100,000
$100,000
(573) 634-8455
Montana
$300,000
$300,000
$100,000
$100,000
(262) 965-5761
Nebraska
$300,000
$300,000
$100,000
$100,000
(402) 474-6900
Nevada
$300,000
$300,000
$100,000
$100,000
(775) 329-8387
New Hampshire
$300,000
$300,000
$100,000
$100,000
(603) 226-9114
New Jersey
$500,000
$500,000
$100,000
$100,000
(973) 623-3989
New Mexico
$300,000
$300,000
$100,000
$100,000
(505) 237-9397
New York
$500,000
$500,000
$500,000
$500,000
(212) 909-6813
No. Carolina
$300,000
$300,000
$300,000
$300,000
(919) 833-6838
North Dakota
$300,000
$300,000
$100,000
$100,000
(701) 235-4108
Ohio
$300,000
$300,000
$100,000
$100,000
(614) 442-6601
Oklahoma
$300,000
$300,000
$100,000
$300,000
(405) 272-9221
Oregon
$300,000
$300,000
$100,000
$100,000
(503) 588-1974
Pennsylvania
$300,000
$300,000
$100,000
$100,000
(610) 975-0572
Puerto Rico
$300,000
$300,000
$100,000
$100,000
(787) 765-2095
Rhode Island
$300,000
$300,000
$100,000
$100,000
(401) 273-2921
So. Carolina
$300,000
$300,000
$300,000
$300,000
(803) 536-9874
South Dakota
$300,000
$300,000
$100,000
$100,000
(605) 336-0177
Tennessee
$300,000
$300,000
$100,000
$100,000
(615) 242-8758
Texas
$300,000
$300,000
$100,000
$100,000
(512) 476-5101
Utah
$500,000
$500,000
$200,000
$200,000
(801) 572-1218
Vermont
$300,000
$300,000
$100,000
$100,000
(802) 244-8540
Virginia
$300,000
$300,000
$100,000
$100,000
(804) 282-2240
Washington
$500,000
$500,000
$500,000
$500,000
(425) 562-3128
West Virginia
$300,000
$300,000
$100,000
$100,000
(304) 733-6904
Wisconsin
$300,000
$300,000
$300,000
$300,000
(608) 242-9473
Wyoming
$300,000
$300,000
$100,000
$100,000
(303) 292-5022
Disclaimer: Annuity.com is not to be held responsible for the accuracy of this information. You are advised to call your state insurance department to verify the accuracy of this information prior to purchasing any annuity contract.
What happens if an insurance company goes out of business?
Life & Health Guaranty Associations
Most states have guaranty funds to help pay the claims of financially impaired insurance companies. State laws specify the lines of insurance covered by these funds and the dollar limits payable. Coverage is usually for individual policyholders and their beneficiaries and not for values held in unallocated group contracts. Most states also restrict insurance agents and companies from advertising the funds’ availability. There are many issues, too numerous to describe here, which determine the type and extent of coverage available. You are advised to consult your state insurance department for details about any policy you consider purchasing. Another source of information is the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA, 13873 Park Center Road, Suite 329, Herndon, VA 22071). http://www.nolhga.com/stateinformation/main.cfm
Liability LimitsTo visit a particular state insurance department's web site, click on the links provided in the table below.
State
Max. aggregate benefits for all lines of insurance
Max. death benefit with respect to any one life
Max. liability for cash or withdrawal value of life insurance policy
Max. liability for present value of an annuity contract
State Guaranty Association Phone Numbers
Alabama
$300,000
$300,000
$100,000
$100,000
(205) 879-2202
Alaska
$300,000
$300,000
$100,000
$100,000
(907) 243-2311
Arizona
$300,000
$300,000
$100,000
$100,000
(602) 364-3863
Arkansas
$300,000
$300,000
$300,000
$300,000
(501) 378-2961
California
80% not to exceed $250,000
80% not to exceed $250,000
80% not to exceed $100,000
80% not to exceed $100,000
(323) 782-0182
Colorado
$300,000
$300,000
$100,000
$100,000
(303) 292-5022
Connecticut
$300,000
$300,000
$100,000
$100,000
(860) 529-3495
Delaware
$300,000
$300,000
$100,000
$100,000
(302) 456-3656
Dist. of Col.
$300,000
$300,000
$100,000
$300,000
(202) 434-8771
Florida
$300,000
$300,000
$100,000
$100,000
(904) 398-3644
Georgia
$300,000
$300,000
$100,000
$100,000
(770) 621-9835
Hawaii
$300,000
$300,000
$100,000
$100,000
(808) 528-5400
Idaho
$300,000
$300,000
$100,000
$100,000
(208) 378-9510
Illinois
$300,000
$300,000
$100,000
$100,000
(773) 714-8050
Indiana
$300,000
$300,000
$100,000
$100,000
(317) 636-8204
Iowa
$300,000
$300,000
$100,000
$100,000
(515) 283-3163
Kansas
$300,000
$300,000
$100,000
$100,000
(785) 271-1199
Kentucky
$300,000
$300,000
$100,000
$100,000
(502) 895-5915
Louisiana
$300,000
$300,000
$100,000
$100,000
(225) 381-0656
Maine
$300,000
$300,000
$100,000
$100,000
(207) 633-1090
Maryland
$300,000
$300,000
$100,000
$100,000
(410) 998-3907
Massachusetts
$300,000
$300,000
$100,000
$100,000
(413) 744-8483
Michigan
$300,000
$300,000
$100,000
$100,000
(517) 372-3863
Minnesota
$300,000
$300,000
$100,000
$100,000
(651) 407-3149
Mississippi
$300,000
$300,000
$100,000
$100,000
(601) 981-0755
Missouri
$300,000
$300,000
$100,000
$100,000
(573) 634-8455
Montana
$300,000
$300,000
$100,000
$100,000
(262) 965-5761
Nebraska
$300,000
$300,000
$100,000
$100,000
(402) 474-6900
Nevada
$300,000
$300,000
$100,000
$100,000
(775) 329-8387
New Hampshire
$300,000
$300,000
$100,000
$100,000
(603) 226-9114
New Jersey
$500,000
$500,000
$100,000
$100,000
(973) 623-3989
New Mexico
$300,000
$300,000
$100,000
$100,000
(505) 237-9397
New York
$500,000
$500,000
$500,000
$500,000
(212) 909-6813
No. Carolina
$300,000
$300,000
$300,000
$300,000
(919) 833-6838
North Dakota
$300,000
$300,000
$100,000
$100,000
(701) 235-4108
Ohio
$300,000
$300,000
$100,000
$100,000
(614) 442-6601
Oklahoma
$300,000
$300,000
$100,000
$300,000
(405) 272-9221
Oregon
$300,000
$300,000
$100,000
$100,000
(503) 588-1974
Pennsylvania
$300,000
$300,000
$100,000
$100,000
(610) 975-0572
Puerto Rico
$300,000
$300,000
$100,000
$100,000
(787) 765-2095
Rhode Island
$300,000
$300,000
$100,000
$100,000
(401) 273-2921
So. Carolina
$300,000
$300,000
$300,000
$300,000
(803) 536-9874
South Dakota
$300,000
$300,000
$100,000
$100,000
(605) 336-0177
Tennessee
$300,000
$300,000
$100,000
$100,000
(615) 242-8758
Texas
$300,000
$300,000
$100,000
$100,000
(512) 476-5101
Utah
$500,000
$500,000
$200,000
$200,000
(801) 572-1218
Vermont
$300,000
$300,000
$100,000
$100,000
(802) 244-8540
Virginia
$300,000
$300,000
$100,000
$100,000
(804) 282-2240
Washington
$500,000
$500,000
$500,000
$500,000
(425) 562-3128
West Virginia
$300,000
$300,000
$100,000
$100,000
(304) 733-6904
Wisconsin
$300,000
$300,000
$300,000
$300,000
(608) 242-9473
Wyoming
$300,000
$300,000
$100,000
$100,000
(303) 292-5022
Disclaimer: Annuity.com is not to be held responsible for the accuracy of this information. You are advised to call your state insurance department to verify the accuracy of this information prior to purchasing any annuity contract.
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