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Why annuities are great opportunities for beneficiaries

There comes a time when everyone has to look at their estates and decide how they want to split them up after their deaths. Determining what to do with your estate is no easy task, and there are many legal options for how to dole out money and other assets.

Annuities are a great way to provide for a family member or members after your death without having to worry about someone doling out a lump sum settlement. Annuities are annual payments made to the person you designate. By planning your annuities correctly, you can stretch the funds you leave behind, so your beneficiaries have money for years to come.

Here's a good example of how to make annuities last. If you invest your annuity funds into a trust, the money can be given out once per year at your request in the amount you determine. For instance, you could issue a lump sum of $10,000 to your son each year for the next ten years to be paid as an annuity, with a final sum being larger than $10,000 due to interest.

Any money left over each year will grow thanks to interest. If the amount you invest is high enough, you may be able to make the annuity payment based on the interest alone, keeping the lump sum in the bank until the final payout that you determine in your estate plan. For example, if you want to give $1,000,000 into an annuity that grows at a 5 percent interest rate, the interest each year would total out at $50,000. You could ask to have $50,000 deposited in your daughter's account each year for the rest of her life, and the $1,000,000 would still be in the bank for future generations.

Source: Life Health Pro, "13 ways an annuity can benefit an estate plan," John L. Olsen, Michael E. Kitces, accessed Aug. 02, 2016

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