Annuity Settlement Options: One of the unique features of an annuity is the opportunity to choose a settlement option and establish a reliable income stream. If a settlement option is chosen, Gleaner will make periodic payments to the annuity beneficiary. Annuity payment options depend on the type of annuity purchased. Immediate annuities can be paid within the year of purchase.
Deferred annuities take years to pay, as tax-free annuity grows with interest. Payment schedules determine the length of income stream and survivor benefits. It would be best if you thought in terms of winning a personal injury lawsuit due to a car accident. First, an annuity agreement is negotiated between the plaintiff and the defendant.
The settlement is then spread out into a series of periodic payments over an agreed period of time rather than a one-time payment in most cases. With the annuity settlement option, you have full control over specific annuity terms. You can select an annuity that makes payments to its beneficiaries for the rest of their lives or for a specific period of time after their death. Life annuity is a general payment category in which payment is guaranteed for life.
Sometimes known as a direct life annuity, the life annuity pays a benefit for as long as the beneficiary lives, and then ends. Whether the beneficiary lives more than 100 years or dies one month after the annuity period begins, annuity payments will continue only until they die. In other words, there is no guarantee as to the minimum amount of benefits under a life annuity. When there are multiple payees, the annuity settlement option allows you to differentiate between beneficiaries.
Deferred Income Annuities (DIA) are, despite “deferring on your behalf”, immediate annuities with late payments. The chart below looks at some of the comparisons between an annuity settlement option and a trust, and indicates where the fit might be best. Regardless of when you begin to receive payments for these products, immediate annuities are designed to create a revenue stream for a set period of time. Structured settlements can be sold, and there is no established formula or standard for how to sell payments.
As an alternative to the annuity settlement option, a trust may be preferred for tax planning purposes (as discussed in the “Tax Reasons” section below) or to control when and how payments will be made to a payee. This is the case with annuities, which provide guaranteed income during retirement, but limit access to the money that funds those income payments for a period of time. Annuity settlement option replaces a lump-sum death benefit with smaller, scheduled payments, while providing savings on management and probate fees, increasing privacy and potential creditor protection. The annuity settlement option may also be effective for minor children or beneficiaries with an impairment in mental functions.
Secondary market annuities occur when a third-party company gives the agreement owner a lump sum of money for payment of the structured settlement. Since the structured settlement annuity is essentially an income annuity, inheritance is treated as such. Once your contract is annualized, part of each payment (of a fixed annuity) is considered a partial refund of the base (your original contribution) and part is considered taxable income through an exclusion index. Manulife Investment Management's annuity settlement option can automatically transfer profits from your insurance contract or policy to an annuity in the event of death.
Manufacturers Life Insurance Company is the issuer of secured insurance contracts, annuities and insurance contracts containing Manulife segregated funds. After the settlement money is negotiated and final terms are reached, the court order will request that the funds be placed in a type of income annuity contract called structured annuities. .