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The answer is a lot, and none of it is good for your clients. Without proper planning, deferred accounts are often subject to as many as 6 different types of penalties. These penalties are most often seen in the form of federal and state ordinary income tax to the heirs of the contract after the death of account’s owner or annuitant. The next most common penalties are federal and state estate taxes. Without a properly established trust or beneficiary designation, your client heirs may also be subject to probate fees. Lastly, some deferred contracts have an adjustment or penalty if the owner or annuitant dies to soon, or if the deferred account’s value is taken as a lump some at death by the heirs. How bad could it be, you wonder? The answer is very bad. Let’s assume that you have a deferred account worth $1 million. Now let’s assume that you are widowed or divorced and wish to leave all of your assets to your two children. Your estate is worth $5 million (consisting mainly of your home, property, and business), which puts it above the estate tax limits for 2006 ($2 million). In this scenario the following would take place.
How can this be avoided? The answer is actually simple. By using our proprietary Annuity Amplifier™ system we can help your clients maximize growth, minimize taxes, and avoid probate on their deferred assets. |
Deferred Annuities and investment accounts like 401k, 403b, IRA’s, etc. can be a great tool when used for creating retirement income, future guaranteed income streams, or Medi-care qualification, but what happens when a deferred account is never used?
Not including any probate or death/surrender penalties, that is a loss of 80% of the account’s original value. When you consider that there is still another $1 million due for estate taxes it is easy to see that the account would be completely depleted and that additional assets would have to be sold off just to pay for the taxes.