Massachusetts Estate Planning & Asset Protection Blog

The ABCs of Annuities

Posted by Wellesley Estate Planning Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Tue, Aug 09, 2011

It is essential that everyone understand annuities because they are an example of a retirement income device and are one of the most common methods for insuring a stable retirement income.

What is an annuity?

An annuity is a contract between you and usually an insurance company.  You make a lump-sum payment or a series of payments to an insurer, and the insurer agrees to give you regular payments, starting right away or at a later date.  Here are the ABCs of annuities:

1.  There are 2 types of annuities:  immediate and deferred.  With the immediate annuity, the insurer begins paying you immediately.  With the deferred annuity, you schedule a future date with the insurer to begin payments.

2.  There are 2 types of returns available:  fixed and variable.  The fixed guarantees a specific dollar amount for each payment; whereas the variable can change based on the investment returns of the insurer.

3.  There are also different time periods to choose from for the payouts:  single life, joint life, specific term, life with certain term.  The single life pays you for the remainder of your life only.  The joint life pays for whichever is longer - your life or the life of your beneficiaries.  Certain term pays you for a finite number of years.  Life with certain term pays you for the rest of your life or to your beneficiaries for the remainder of a specific number of years.

4.  Annuities are NOT FDIC insured but many states provide insurance up to $100,000. The Wharton School has an 11-page guide entitled "Investing Your Lump Sum at Retirement."  You can down load it here.  Please note that this paper was co-sponsored by New York Life Insurance Company; however, it is quite informative.

As you can see, annuities are understandable and can be very useful in retirement planning.  For more information on estate and retirement planning, watch Dennis Sullivan, Esq., CPA, LLM discuss this topic on the national talk show, "Ask The Experts."

To learn about this topic along with how to protect your home and assets from avoidable taxes, probate, and the increasing costs of nursing homes and medical care, call 800-964-4295 (24/7) or register online for one of our Trust, Estate & Asset Protection workshops.

Tags: asset protection, Retirement, annuity, cash

The Reverse Mortgage: Useful Tool for Massachusetts Planning?

Posted by Wellesley Estate Planning Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Mon, Aug 08, 2011

The Basics

Reverse mortgages can be a useful option for homeowners who are in need of cash.  However, most financial experts warn against these and suggest liquidating your portfolio and reducing your living expenses before going this route.  To many they are usually considered a last resort.  This option was introduced in 1989 and allows Americans age 62 and older to access a portion of their home equity without having to move.

Benefits of a Reverse Mortgage

The bank pays the borrower throughout his or her lifetime according to the amount of accumulated home equity. The loan balance does not have to be repaid until the borrower dies, sells the home or permanently moves out.  Because of the nature of the loan, you can never owe more than the value of your home, and if the balance is less than the value of your home at the time of repayment, you or your heirs keep the difference.

To be eligible, the property in question must be your primary residence, and you must either own it outright or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan.  Generally, the older you are and the more valuable your home, the more money you can get.

You may want to check out AARP's calculator which helps retirees figure out how much money they might be eligible to receive.  There are no restrictions for how the money from a reverse mortgage must be used, and the proceeds can be received in a lump sum or some type of monthly payment.

What's the catch?

Reverse mortgages are complex and can affect eligibility for Medicaid and Supplemental Security Income benefits.  The closing costs and interest rates involved are often higher than with a usual mortgage.

Needless to say, if you are spending the equity in your home, you are reducing that value of that asset when it ultimately passes on to your heirs.

For more information on planning for retirement, watch Dennis Sullivan, Esq., CPA, LLM talk about estate and retirement planning on the national talk show, "Ask The Experts."  To learn firsthand how to plan for and protect your assets and life-savings, register online or call 800-964-4295 (24/7) to attend for one of our Trust, Estate & Asset Protection workshops.

Tags: Retirement, Estate Planning, cash, CCRCs, reverse mortgage

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