A beneficiary can be designated by the owner or automatically assigned through the policy or contract. It’s essential to understand who these beneficiaries are and how they will be affected by the annuity payments to best plan for retirement income needs, says The Salisbury Post’s recent article entitled “What exactly is a beneficiary?” Let’s look at the different types:
- Primary Beneficiary: This is typically designated by the owner when they buy the account who will receive any remaining funds from the annuity after the owner’s death. If there are multiple primary beneficiaries on an account, each may get a proportional portion of any remaining funds at death based on their age and relationship to the owner. Depending on individual circumstances, this may be taxable.
- Secondary Beneficiaries: This is another individual who might benefit from an annuity upon the death of both owners (if it’s owned jointly). If a secondary beneficiary isn’t named, any remaining funds will pass directly through the owner’s estate according to state laws of intestate succession, if applicable.
- Contingent Beneficiaries: In some instances, an owner may want to name a contingent beneficiary in the event that the primary and secondary predecease him or her before taking ownership of the annuity.
Annuity owners should keep their beneficiaries up to date by making sure they’re aware of changes in their lives such as marriages, divorces, the births or adoptions of children, the deaths of a loved ones, or any other relevant life events that may impact the ownership and/or distribution of the annuity policy.
It’s also important to think about the tax implications for everyone involved and how the funds should be allocated should something unexpected happen.
By understanding annuity beneficiaries and taking the time to name them correctly, an annuity owner can be sure his or her beneficiaries receive the funds from the annuity in accordance with their wishes.
Speak to an experienced estate planning attorney for more information about annuities and how naming the correct beneficiaries may help protect both you and those closest to you in the future.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Salisbury Post (Feb. 26, 2023) “What exactly is a beneficiary?”