Maximizing Annuities' Potential: Estate PlanningCharitable Giving Strategies

Using Annuities for Diversified Financial Planning Goals: Insured Annuities Charitable Giving

In addition to providing a secure, lifetime income stream, annuities offer investors two innovative strategies for achieving broader financial planning objectives. These include funding your estate with insured annuities and supporting charitable causes through charitable gift annuities.

1. Funding Your Estate with an Insured Annuity

An insured annuity, often referred to as a life contingent income strategy, combines the benefits of an ordinary annuity with a life insurance policy. It's designed for individuals who seek both a guaranteed income stream and a way to ensure their beneficiaries receive a lump sum upon their death.

• How it works:

  • Purchase process: Invest a lump sum from your non-registered financial assets into a prescribed life annuity.

  • Tax-efficient income generation: A portion of the annuity payments is interest income, which is taxable. However, part of the income may be tax-free, leading to higher after-tax returns than investing in fully taxable accounts like GICs.

  • Life insurance premiums: Some of your annuity payments are used to cover life insurance premium payments for a policy equal to the cost of purchasing the annuity.

  • Estate benefit: Upon the annuitant's death, beneficiaries or the estate receive a lump sum payment from the insurance coverage, tax-free.

2. Supporting Charitable Causes with a Charitable Gift Annuity

A charitable gift annuity is an effective solution for generating retirement income while contributing to your favorite charity. Here’s how it works:

• Transaction: Donate a lump sum of cash or other assets to a nonprofit organization.

• Annuity purchase: The charity uses the funds to buy an annuity from an insurance company, which then pays you guaranteed monthly income based on the actuarial calculations tied to your age and health when you set up the annuity.

• Tax relief: As part of your donation, you receive a tax receipt for the difference between the present value of the annuity contract pd by your gift and the expected payments from the annuity.

Key Takeaways

• Insured Annuities: These offer lifetime income alongside an estate benefit through insurance coverage upon death.

• Charitable Gift Annuities: Enable retirees to support their favorite causes while ensuring a steady income stream for themselves.

  serves as a guide but is not exhaustive advice. Always consult with your financial advisor before making decisions involving annuities, insurance, or charitable giving, given the complexity of these strategies and individual circumstances that may influence suitability.

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Updated September 22, 2023

Articles in this Section:

• Insured Annuities: Lifetime Income and Estate Planning

• Charitable Gift Annuities: Retirement Income for Good Works

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• Insured Annuity Concept: Creative Commonshttps:commons.wikimedia.orgwikiFile:Annuity_illustration.png

• Charitable Giving Concept: Creative Commonshttps:commons.wikimedia.orgwikiFile:Charitable_giving.svg
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