Immediate Annuities; Rich Incomes, Rich Multi-Generational Tax Benefits

Immediate annuities, known to be rich in guaranteed income, are also rich in multi-generational income tax benefits versus other annuities.  One of my all-time favorite immediate annuity income tax strategies for both contract owners and their beneficiaries for wealth transfer purposes is the interplay of IRS permitted cost basis recovery rules between the generations.  More proof, the Federal government really likes these contracts and lavishes tax benefits accordingly. Let’s look…

SPIA First-In First-Out (FIFO), What’s Going On? Old IRS Tables Clash With Current Annuity Pricing

Due to old and unmodified IRS life expectancy tables, particularly table V and VIII, many immediate annuities (mortality polled income contracts) may produce income tax advantages in the form of a “non-taxable” income source.  Of course, non-taxable income is not the same as tax free income.  How is this possible?  It’s possible because these old IRS tables still assume shorter life expectancies derived from 1970s and earlier data.  The shorter…

“King William’s Tontine” by Moshe A. Milevsky A Life Insurance Industry – Shot Across the Bow!

Book Review – Moshe A. Milevsky, in a life insurance industry – shot across the bow, makes yet another ground breaking appeal since his landmark 2004 white paper on Advanced Life Delayed Annuities (ALDAs) that set the tone for the deferred income annuity (DIA) products we have today.  The book re-evaluates how we think about lifetime income and what might make sense when it comes to “sharing” longevity risk among…

Elder Financial Fraud and Immediate Annuities

One of the problems regarding elder financial fraud is average families have not fully considered all the merits of the array of financial products and how they might work to protect them from elder financial fraud.  However, in today’s day and age, this is surprisingly an extremely short list indeed.   The protection really needs to start at the financial product level and not just be some new advisor practice penalty,…

It’s Splitsville: Divorce and SPIAs 2015 Update

A few readers asked me to make further comments regarding the particular deferred income annuity (DIA) marital property case involving an IRA DIA contract highlighted in the LifehealthPro article I authored last year in April 2014 when DIAs feature adjustable start dates.  Most DIA (IRAs and non-qualified) contracts feature adjustable start dates that can, upon the owner’s request,  be advanced or delayed up to five years from the issued contract’s…

In the Deep Dark World of Supplemental Annuity Contracts; Owners Rights May Not Be Protected!

So, what’s the big deal, anyway!  I don’t believe too many agents, CPAs or attorneys have seen a supplemental annuity contract.  Supplemental annuity contracts are issued by carriers when owners elect to either partially or fully annuitize their existing deferred annuity contracts or life insurance policies.  What many agents and individuals don’t realize is there is no state filing requirements for supplemental annuity contracts!  This leaves the door open for carriers…

IRA SPIA “Pop-Up” Payment Increases at Death

I’m sometimes asked about IRA SPIA payment “increases” after the SPIA start date and upon the death of the joint annuitant.  The idea is to encourage a SPIA annuitant/owner to elect a joint and survivor feature with the knowledge if their joint annuitant predeceases them, the annuitant/owner will still get the single life rate!  This is commonly referred to as a pension “pop-up” and is a payment feature found in some defined benefit…

Low Interest Rates? Tip Your Toe in the Annuity Mortality Pool

An annuity mortality pool is the collection of all individuals who purchase life contingent annuity contracts from a life insurance company.  Most individuals and agents believe, in order to join this pool and to obtain the mortality discounts these contracts offer for better annuity pricing, they are required to purchase annuity contracts supporting life contingent payments out to age 120 or there-a-bouts.  These payments typically are supported by joint and survivor,…

SPIA Purchasing: Are you sure you want to wait for higher interest rates?

  Regarding SPIAs, I know the normal emphasis is on interest rates but, when SPIAs are “mortality based”, paid on the stipulation you remain alive, mortality and mortality discounts become much more important factors in the decision of when to purchase vs. the speculation of an interest rate increase from these ultra-low levels down the road. Take the following example of 100 males all age 65 who purchase a lifetime…

Gays and Lesbians: Maximizing SPIA RMDs for Survivor Benefits

While traditionally married couples receive Federal tax benefits not all gay and Lesbian couples are so fortunate. There are still 20 remaining states that don’t recognize gay marriage. The Defense of Marriage Act (DOMA) finally died on June 26, 2013 under a 5-4 US Supreme Court decision declaring section 3 (restricting U.S. federal interpretation of “marriage” and “spouse” to apply only to heterosexual unions) of DOMA unconstitutional. Following this in short…