The Annuity Handbook

by Darlene K. Chandler

Overview

The Annuity Handbook, 4th Edition has been updated with the latest available information on nonqualified annuities to provide a comprehensive look at the most current information on the markets, compliance issues, taxation, and uses of annuities. What's NEW in the 4th Edition: Product Features: Market value adjustments Guaranteed minimum interest rate index Discussion of owner-driven contracts vs. annuitant contracts Bonus annuities Guaranteed death beneftis in variable annuities Uses of Annuities: Trust ownership of annuities Use of annuity payouts and settlement options for retirement income distribution planning Split annuity sales idea Annuities owned by Medicaid applicants/recipients Expanded discussion of annuities and retirement planning to include retirement income distribution considerations Compliance: New suitability requirements for fixed annuities sold to seniors < Compliance considerations in selling variable annuities - Investor Alerts, etc. from NASD Tax Updates: Systematic Withdrawals - uses and taxation of General update of income, gift, and estate tax rates Updated discussion of Section 1035 exchanges Expanded discussion of pre-59 1/2 withdrawals and 10% premature penalty tax Discussion of whether annuity "losses" are deductible

Product Details

ISBN-13:	9780872186668
Publisher:	National Underwriter Company
Publication date:	09/30/2005
Pages:	242
Product dimensions:	6.00(w) x 8.90(h) x 0.70(d)

Table of Contents

	Dedication	iii
	Acknowledgements	v
	About the Author	vii
Chapter 1	The Definition of an Annuity	1
	What Is An Annuity?	3
	What Is A "Nonqualified" Annuity?	5
	The Annuity's Unique Feature	5
	Who Purchases Annuities?	8
	The Time Line of an Annuity	9
	The Accumulation Phase	9
	The Annuitization Phase	10
	Other Types of Annuities	10
Chapter 2	The Parties to an Annuity	13
	The Owner	14
	The Annuitant	16
	The Beneficiary	18
	The Insurance Company	20
Chapter 3	Standard Annunity Contract Provisions	23
	Bailout Provisions and Rates	24
	Charges and Fees	25
	Fixed Annuities	25
	Variable Annuities	26
	Dollar Cost Averaging	27
	Interest Rates	28
	Fixed Annuities	28
	Variable Annuities	30
	Issue Ages	31
	Maximum Ages for Benefits to Begin	31
	Nonqualified Annuities	31
	Other Annuities	32
	Nursing Home Waiver	32
	Premium Payments	33
	Settlement Options	34
	Life Annuity	35
	Life With Period Certain Guarantee	36
	Refund Life Annuity	37
	Joint and Survivor Life Annuity	37
	Fixed Period Annuity	39
	Fixed Amount Annuity	39
	Interest Income	40
	Surrender Charges	40
	Withdrawals	43
	Partial Surrender	43
	Full Surrender	44
	10% Per Year Withdrawal	44
	Systematic Withdrawal Option	45
	Loans	46
Chapter 4	The Various Types of Annuities	47
	Single Premium Annuities	47
	Flexible Premium Annuities	51
	Fixed Annuities	52
	Equity-Indexed Annuities	54
	Variable Annuities	54
	Assumption of the Investment Risk	55
	The Investment Options--The Variable Accounts	56
	The Investment Options--The Guaranteed Acount	59
	Transfers Among Investment Accounts	61
	Automatic Rebalancing	63
	Benefit Payments From Variable Annuities	64
	Fixed Annuity Benefit Payout	64
	Variable Annuity Benefit Payout	65
	Variable Annuity Death Benefit	67
	Immediate Annuities	68
	Deferred Annuities	69
	Charitable Gift Annuities	71
	Private Annuities	73
Chapter 5	The Newest Annuity--The Equity-Indexed Annuity	77
	Introduction--What is an Equity-Indexed Annuity?	78
	Advantages and Disadvantages	78
	How Does the Indexing Work?	81
	Typical EIA Contract Features	85
	Cap Rate	85
	Death Benefit	86
	Fees and Expenses	86
	Indexing Methods	87
	Maximum Issue Ages	87
	Minimum Guaranteed Interest Rate	87
	Minimum Premiums	88
	Partial Withdrawal Provisions	88
	Participation Rate	89
	Policy Loans	90
	Policy Term	90
	Settlement Options	92
	Surrender Charges	92
	Surrender Provisions	93
	Vesting Schedules	93
	How is an EIA Used?	94
	Who Can Sell EIAs?	96
Chapter 6	The Uses of Annuities	99
	Retirement Planning	99
	Other Retirement Planning Vehicles	101
	Individual Retirement Arrangements	102
	Qualified Retirement Plans	104
	Tax Sheltered Annuities	105
	Charitable Planning	106
	Gift of an Annuity	106
	Charitable Gift Annuity	107
	Charitable Trusts	108
	Charitable Remainder Trusts	108
	Charitable Lead Trusts	110
	Pooled Income Funds	110
	College Funding	111
	Business Planning	114
	Retirement Planning	114
	Nonqualified Deferred Compensation Plans	116
	Sale of a Business	116
	Bonus Plan	118
	Alternatives to Annuities	119
	Bank Savings Account	119
	Certificates of Deposit	120
	Mutual Funds	121
Chapter 7	Income Taxation of Annuities	123
	Premiums	123
	Cash Value Build-up	124
	Natural Persons	124
	Nonnatural Persons	124
	Loans and Assignments	126
	Partial Withdrawals	127
	Contract Surrender Charges	127
	10% Premature Distribution Penalty Tax	128
	Taxation of Withdrawals	130
	Multiple Annuity Contracts	133
	Effect of a Tax Free Exchange	133
	Complete Surrender of the Annuity	133
	Exchanges--Section 1035	134
	Gift of an Annuity	137
	Sale of an Annuity	139
	The Seller	139
	The Purchaser	140
	Taxation of Annuity Benefit Payments	140
	The Basic Rule	140
	The Exclusion Ratio	141
	The Investment in the Contract	142
	The Expected Return	143
	The Annuity Tables	146
	Taxation of Variable Annuity Benefit Payments	146
	Death of the Annuity Owner	148
	Death of the Annuitant	150
Chapter 8	Estate Taxation of Annuities	155
	What is the Estate Tax?	155
	How is the Estate Tax Calculated?	155
	Deductions From the Estate Tax	157
	Annuity Contracts Owned at Death	159
	In the Accumulation Phase	160
	In the Annuitization Phase	161
	Owner and Annuitant Are Not the Same Person	163
	Annuity Contracts Purchased as Gifts	163
	Private Annuities	164
Chapter 9	Gift Taxation of Annuities	167
	What is the Gift Tax?	167
	How is the Gift Tax Calculated?	167
	The Annual Exclusion	169
	The Unified Credit	172
	Deductions From the Gift Tax	173
	What Constitutes a Gift?	176
	Gift of an Annuity Contract	176
	Purchase of a Joint and Survivor Annuity	176
	Assignment of an Annuity Contract	177
	Payment of an Annuity Premium	177
	Naming an Irrevocable Beneficiary	178
	How is the Gift of an Annuity Valued?	179
Appendix A	Actuarial Tables	181
Table I183
Table II183
Table IIA185
Table III187
Table V190
Table VI191
Table VIA192
Table VII194
Appendix B	Examples of Exclusion Ratio Calculations	197
	Single Life Annuity	197
	Refund or Period Certain Guarantee	198
	Joint and Survivor Annuity (Same Income to Survivor as to Both Annuitants Before Any Death)	200
	Joint and Survivor Annuity (Income to Survivor Differs from Income Before First Death)	201
Appendix C	Internal Revenue Code Sections	203
	Section 72	203
	Section 1035	245
	Section 2033	246
	Section 2039	247
Appendix D	Sample Annuity Applications	249
	Sample Fixed Annuity Application	249
	Sample Variable Annuity Application	251
	Index	253