Ask a Provo Estate Planning Lawyer: What Is An Annuity?
There are so many considerations to make when doing your estate planning, and it can get downright confusing. Suddenly you’re talking about assets and investments, wills and trusts, life insurance and death taxes. No wonder people turn to their estate planning lawyers in Provo and surrounding areas for help. In order to de-mystify at least one of these estate planning tools, today we’re going to take a moment to ask and answer the question “What is an annuity?”
If you go to the dictionary for an answer, you will get the following: “A specified income payable at stated intervals for a fixed or a contingent period, often for the recipient’s life, in consideration of a stipulated premium paid either in prior installment payments or in a single payment.”
Estate planning lawyers near Provo and surrounding areas generally deal with annuities as a type of insurance product that clients use as a retirement strategy. They can be beneficial because of the way they provide a steady stream of income. These payments are made to you because of an earlier investment you made with the company. The investment you make can be into a fixed annuity that guarantees a certain payout or a variable annuity, where the payout depends on the performance of investments made with the funds. Either way, the result is that you receive money back at predetermined times. Payments can be made monthly, quarterly, annually, or as a lump sum all at once.
There are different types of annuities to consider, including “immediate” and “deferred” annuities. These pay out at different stages (earlier and later, as the names imply). No matter what kind of annuity you get, you will want to decide whether it will pay out over your entire lifespan (after reaching a certain age) or if you prefer for it to be for a predetermined length of time.
Annuities certainly have their advantages when it comes to having an income during the retirement years, but there are drawbacks that you will want to discuss with your Provo area estate planning lawyer. One of the biggest is the fact that annuities can be very expensive. The allure of the payout can be pretty strong, but it is definitely worth delving into with a knowledgeable attorney to decide if you will benefit or be hurt in the long run.
If you have questions about whether an annuity would be a wise investment toward your personal retirement strategy, we encourage you to contact our estate planning lawyers in the Provo area to schedule a complimentary consultation with the mention of this article.