Jun
26
Annuities + IRA = Bad News
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Note to self: Bankers are not lawyers. Accountants are not lawyers. Insurance brokers are not lawyers. People who sell annuities are not lawyers. And they are not going to know how a particular financial product fits into your estate plan. Case in point is a "disaster in the making" (pointed out courtesy of Natalie Choate, in turn courtesy of Mark Cortazzo CFP of Macro Consulting Group in New Jersey): An IRA owner has the account at a brokerage firm, as many of us do. The IRA owner buys an annuity contract INSIDE the IRA. The annuity contains various payout provisions and guarantees. The IRA owner has a beneficiary designation of the client's nephew or a living trust. The IRA beneficiary designation overrides the beneficiary designation for the annuity contract, which may have its own beneficiary designation. As a result, it may void the guarantees that are part of the contract. For example, if the annuity contract provides that there will be a life annuity paid to the participant's surviving spouse if he or she is the sole beneficiary, the identification of a different beneficiary on the IRA will void those survivorship annuities for the spouse. This is a danger if the client purchased the annuity after the estate plan was put in place, or even if it was done before and the client does not alert the lawyer to this fact. Another piece of evidence that doing it on your own isn't prudent.

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