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HELP! I’M RUNNING OUT OF MONEY

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“Roll-up” death benefit: Original premium = $100,000 Contract value at death $137,000 Assumed 3% annual return on contract = $112,550 Death benefit on July 1, 2003 (specified anniversary date) = $109,000 Beneficiary receives $137,000

Be sure you know which type of death benefit your contract allows. That way you’ll have an accurate concept of what to expect. Plus, the annuity contract may specify that the death bene- fit not exceed a certain amount, age, or percentage of the original premium.

Loans and Withdrawals Annuities may also allow for loans or withdrawals by their owners. However, for those owners who wish to take out a loan against their annuity (or just withdraw money) and who haven’t reached age 591/2, there will be the 10-percent IRS early withdrawal penalty. There are some exceptions to this rule, though. Individuals may take substan- tially equal periodic payments in the case of the owner’s disability or death, or for the purchase of an immediate annuity.

Exchanges The IRS also allows for a tax-free exchange of nonqualified annu- ities (i.e., those not within an IRA). This is known as a 1035 exchange, and must be from one annuity to another. Should the owner be dissatisfied with the internal subaccounts, service, or per- formance of the annuity, he or she will be able to exchange it for a different annuity. This works not only from annuity to annuity within one company, but also across different companies. However, there may be some surrender charges for the older annuity.

Many times, the annuity owner differs from the annuitant. I’ve seen this happen when the wife’s trust owns the annuity, but the annuitant is the husband. It’s the annuitant whose life expectancy determines the timing and amount of the payouts, should the annuity be annuitized.

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