Annuities are a type of insurance plan that crosses over into the investment realm. In much the same way as with Social Security in the United States, they defer a planned amount of money into a fund that can be accessed at the owner’s discretion anytime after a particular age. In many cases the revenue that feeds an annuity is channeled from a stock market investment, and payments will be automatically released on a regular basis chosen by the owner. An annuity beneficiary is someone who is named to inherit this amount if the owner should die before using it all. It is somewhat like a trust fund.
Annuity beneficiaries, like most other inheritors, can be subject to taxes in some cases. The good news is that annuities are far less susceptible to these issues than most other forms of inheritance because they are channeled through an insurance company. Annuity owners should directly and clearly name one or more annuities beneficiaries in the annuity contract.
The insurance company and the type of contract will determine whether taxes will be imposed, and how much will be taken out. Contracts should be read and entered into carefully, and owners of an annuity have the right to demand changes to their contract. Annuity beneficiaries usually trump inheritors named in a will, so the content of the annuity contract is vital. If an annuity owner wishes to change one or more of the beneficiaries listed in his contract, he will usually need to fill out a form and submit it to the insurance agent in charge of the annuity, who will then make the change. Owners can also name more than one person as beneficiary, and some annuity owners even choose several people.
A primary annuity beneficiary is the one who comes first in the inheritance process. Annuity owners can name one or more preferred inheritors and specify what percentage each of them is to receive. Contingent beneficiaries act as the second line of defense, a backup plan in case one or all of the primary beneficiaries dies before they can accept the funds.
It’s important to choose an annuity beneficiary wisely. People often decide to open an annuity before they retire because it can provide lifelong funds. If an annuity beneficiary decides to take all of his inheritance at once, or if the beneficiary is already wealthy, then he may become subject to higher taxes when he inherits, and much of the annuity money may end up going to the government.
Some annuity owners and annuities beneficiaries choose to operate in a foreign country where annuities make bigger profits. Switzerland is a popular choice. The rest of the European Union and Australia tend to have slightly stricter laws than those in the United States, while Asia and South America vary from region to region.