How to Structure an Annuity Contract

Overview

Annuities are a unique type of investment vehicle that can help clients accumulate tax-deferred funds for the future and then distribute those funds systematically over a set period of time. Advisors and agents must ensure that annuities are structured properly with regard to who is named owner, annuitant, and beneficiary to ensure that clients’ financial objectives are ultimately met. Improper or careless annuity structuring can easily uproot a client’s financial plans and strategies.

This course provides an orientation to the structure of an annuity contract. It covers the unique features of annuities that may be affected by contract structure, and details the differences between simple and complex structures and owner-driven vs. annuitant-driven contracts. The effects of an annuity's structure on a contract's death benefit are explored, as are common mishaps that may occur if annuities are not structured properly. The last section of the course considers the advantages and disadvantages of trust ownership of an annuity.

Learning Objectives

Upon conclusion of this course, students will be able to:

  • demonstrate an understanding of the core annuity features that may be affected by annuity contract structure
  • describe the tax treatment of amounts received when a contract is annuitized versus other types of withdrawals from annuities
  • identify the elements that affect annuity structuring, including the designation of the parties to the contract; whether the designation of the contract's parties produces a simple or complex structure; whether the contract is owner-driven or annuitant-driven; and the contract's provision for a death benefit and when it is payable
  • demonstrate an understanding of the effect of annuity structure and design on the payment of death benefits
  • identify the consequences that may result from improper annuity structure
  • demonstrate an understanding of the factors to consider before recommending annuity ownership by a trust

Designed For

Life and health insurance producers; financial planners and advisors, CPAs

Prerequisites

A basic understanding of annuities
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