Getting through the Facts of Annuity Death Benefits

Death although inevitable is not easy to discuss especially, in the presence of a financial advisor handling your annuity account. Be that as it may seem, you still have to confer about it to make sure that you are getting a suitable annuity plan in the unfortunate event of death.

Ideally, financial advisors do have your best interests in mind. Do not feel offended if the situation of death is factored in the variables of annuity policies you are choosing from. It is important that you understand them carefully so that your investment and beneficiaries, if any, are protected.

During the regrettable time of your bereavement, you will ask, what will happen to your annuity? Such is an important feature that you should ask your financial advisor, if he has not discussed it yet. You might be surprised; not all annuity plans offer death benefits, especially most fixed annuity plans. It would be a shame to see your investments be lost in vain due to misunderstanding or miscommunication. Many financial consultants reckon that anti-annuities critics fuel their advocacy from stories of 'unclaimed' annuity benefits, when in truth; it is simply just a case of death benefit misunderstanding.

So what are the nitty-gritty details of annuity death benefits that you should know? First is that once the annuity benefit is transferred to their heirs, they will cover the deferred tax withdrawal of the annuity plan. The annuity withdrawal taxes are dependent on the beneficiary's tax bracket.

Next thing you should know is that unlike other investments such as mutual funds, real estate and stocks, there is no 'step-up' option in annuities. You should also know there is also such a thing as surrendering charge provisions of the death benefit to their heirs. Sometimes, it will entail the beneficiary to make a decision whether to take annuitization or get a lump sum with the corresponding surrender charge.

If you wish to get an annuity where in your beneficiaries will be able to continue the payment contributions, choose a plan which has stretch provisions. The advantage of choosing such feature is that the beneficiaries can opt to defer the taxes on the annuity for as long as they wish, since the distributions are based on their own life expectancy. You should also know the payment arrangement of the death benefit, in order to clear any post-bereavement confusion of the annuity claims.

Keep in mind that knowing the death benefit policies of your annuities, although important, should not be the main focus in shopping for a suitable annuity. There are a lot more factors to consider, such as interests, type of amortization and many other important variables. The bottom line is, you should always see the bigger picture in any kind of investment venture.