Annuities

Annuities

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Annuities

Annuities definition:  Annuities are insurance contracts that pay annual income for a specified number of years or lifetime of the policy holder. Beneficiaries of annuities receive benefits outside of probate. Interest income is taxed upon withdrawal by the owner or beneficiary. The entire annuity balance (or suvivor benefit) is also taxed as a part of the taxable estate. The beneficiary gets an income tax deduction on the double taxation of accumulated interest. While lifetime income is guaranteed with an annuity, the rate of return may be less than availabe elsewhere. Annuities can also be costly or difficult to liquidate with surrender charges. There are many benefit options or riders for annuities, such as spouse coverage (to continue payments until the last spouse dies), death benefits for beneficiaries, and cost-of-living or inflation adjustments.

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