What Are Annuities?

What Are Annuities?

Annuities are an insurance contract issued and distributed by financial institutions, created with the intention of paying out invested funds in a fixed income stream. If you own annuities, you have probably invested in or bought an annuity with a lump sum or monthly premium. You’ll receive those payments throughout the specified period, which is usually common during retirement.

If your estate contains annuities, here is how to plan for the future:

How it works

Annuities are supposed to provide cash flow for people during their retirement years. There are two different phases of an annuity: the accumulation phase, where the annuity is funded, and the annuitization period, in which payments commence.

You can buy an annuity immediately, or choose a deferred plan. Immediate annuities are often purchased by people who have a large lump sum of money and want to live off the cash flow. Deferred annuities grow on a tax-deferred basis, and provides the recipient with guaranteed income.

The amount an annuity will pay out each month depends on a few things: the amount the annuity was purchased for, the age of the person receiving the annuity, when the annuity payments start, and the type of annuity that is used.

Ultimately, annuities can be a great way to plan for your financial future. However, it is important that your heirs know how to access this information. If you have annuities, talk to your estate planning attorney to discuss best practices.

The experienced estate planning attorneys at Baumann Kangas Estate Law can help you sort your annuities in Tampa, FL. Call today for a consultation.