Do retirement needs impact your estate planning?

On behalf of Bebout, Potere, Cox & Bennion, P.C. posted in estate planning on Monday, May 8, 2017.

Many Americans may find it easer to discuss retirement needs rather than estate planning. The former may include fun goals, like retirement vacations, perhaps a move to a warmer climate, or simply more time to take up a hobby or check items off one’s bucket list. Thinking about one’s passing, in contrast, often feels more like a duty or an obligation owed to one’s surviving family members.

Yet the two topics can go hand-in-hand. For example, the rising costs of healthcare and assisted living may require many Americans to revise their retirement planning. Fortunately, many financial products can be utilized in both retirement and estate planning, such as annuities.

In general, an annuity is a financial product that makes payments at regular intervals. The payment period may be for a fixed period of time, or be tied to the occurrence of an event. A federal agency called the Health Care Financing Administration has set forth some guidelines for annuities, particularly regarding minimum interest rates and the time period for which annuities can be written. Yet the essence of an annuity is a private contract between two parties. Hence, those parties have the freedom to customize various arrangements, subject to the broad parameters that the HCFA has established.

Some companies set up their annuity products similar to asset-based life insurance policies. In exchange for a lump-sum deposit, an individual receives interest. If a need for long-term care arises, a multiplier will be applied to the deposit to help cover the expenses.

In the context of estate planning, an individual may prefer an annuity that pays income to the annuitant during his or her lifetime, and in the event of the annuitant’s early passing, pay the balance of any remaining payments to the annuity’s designated beneficiaries.

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