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have an annuity question?
have an annuity question?

Estate Planning Made Simple: How To Pass On Wealth Using An Annuity

Ronnie found true love late in life and remarried at the age of 45. He and his new wife bought a new house and together they raised two daughters. Ronnie wanted to make sure that his daughters and new wife were taken care of, but he didn’t want the hassle and expense of setting up a trust. So he chose to write out his intentions in a last will and testament. Ten years later when Ronnie passed away, his wife and daughters were surprised to find out they would not be receiving anything from Ronnie’s 401(k), valued at $1.3 million. Because of a simple planning mistake, they wouldn’t get any of that money at all. Here is what you need to know about how annuities can help your retirement and estate planning with a simpler option for the transfer of wealth.

HOW ESTATE PLANNING MISTAKES HAPPEN

We understand that when big life changes happen, it’s not so easy to get all your financial affairs in order. These changes might include a new relationship, a divorce, or the arrival of a baby. One of the most common changes is employment. The average person today changes jobs ten to fifteen times during his or her career. So what happens to those IRAs and 401(k)s? Sometimes they are rolled over into new plans, sometimes they are left to grow, but usually in either case the beneficiary designations are left as-is. Rarely do people think to update the beneficiary designations on contract forms as life circumstances change. But here’s the thing: beneficiary designations trump last will and testament. If there is a discrepancy between the person listed as your beneficiary in your will and the person listed in the contract of your retirement account (such as a 401(k) or IRA), guess who wins? The money goes to the person listed in the contract of your retirement account, life insurance policy, or annuity contract.

WHAT YOU NEED TO KNOW ABOUT PROBATE

Generally speaking, assets left in a will are required to pass through the expensive and time-consuming process of probate. This is a court-supervised process whereby the last will and testament are authenticated, the value of each asset is determined, and all remaining taxes and bills are paid before the assets are passed to your beneficiaries. Probate is a public process and can take anywhere from six months to several years depending on complications. By taking the time to set up your assets in a trust, you can ensure that your estate avoids probate; however, setting up a trust can be expensive. Attorney fees make up the bulk of the costs, which can range anywhere from $1,500 to several thousand dollars for married couples. While having a will and/or a trust can play a big role in retirement planning, we understand that you might prefer a less expensive way to transfer wealth while at the same time avoiding probate.

A LESS EXPENSIVE OPTION FOR AVOIDING PROBATE

Assets that have named beneficiaries, such as life insurance policies and annuity contracts are, generally speaking, passed on to heirs without the expense of probate. These are payable-on-death accounts, which means that after the owner’s death, the process of wealth transfer is simplified. All your heir has to do is show the bank or insurance company a death certificate to acquire the asset. No fees, no probate, and no stress. Of course, annuities can be used for many purposes. They can grow your money for saving purposes, or they can be structured to pay out an income for a designated period of time. In the old days, it used to be that when an annuitant passed away before receiving all the payments, the remaining money reverted back to the insurance company. This is not the case anymore. Today’s investors have more options than they realize when it comes to using annuities for estate planning. They can be a more secure place to hold money that you intend to pass on, and beneficiary designations make it easy to take care of the people that you love. Finding the right annuity for you can be a complicated process. We at Annuity Gator understand that this isn’t a decision you want to make lightly. If you have questions about how to use an annuity as an inexpensive way to avoid probate, take a moment to fill out our form and one of our planning experts will get back to you soon. Don’t delay. The form takes just a minute to fill out, yet taking this step could save your family both time and money. Build Wealth Like A Millionaire Without Saving In A 401(K)

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