How an Annuity Can Protect Your Loved Ones After You Pass Away

Using an annuity for estate planning

Do you have a will? Hopefully the answer to that question is yes. A will is one of the most fundamental and important pieces in any estate plan. A will designates which heirs should receive which of your assets after you pass away. It helps reduce conflict and argument among your heirs and it helps them manage the financial aspects of your death during an already difficult time.

A will doesn’t resolve every estate planning challenge, however. Even if you have a will, your estate will likely have to go through a legal process called probate. This is a process in which your heirs and the local court finalize your will and settle all outstanding financial issues. It can be time consuming and costly. Your estate may have to pay significant costs for court and legal expenses. And probate could delay the distribution of your assets for months.

Fortunately, there are steps you can take to minimize the impact of probate. One strategy is put some of your funds in an annuity. Below is more information on how probate could impact your loved ones and how an annuity can help. If you haven’t yet developed a probate-protection strategy, now may be the time to do so.

What happens during probate?

If you’ve never managed a loved one’s estate, you may be unfamiliar with how probate works. It can be a complicated process, depending on the complexity of your estate. The primary goal of probate is to resolve any outstanding issues before assets are distributed to heirs.

While the process differs by location, probate usually begins with certification of the will. A local probate judge reviews the will and certifies that it is valid. The judge also appoints an estate representative, known as the executor. You may have named your executor in your will. If not, the judge will appoint one for you.

The executor then works to resolve a wide range of financial and legal issues. They can include:

  • Tracking down all potential assets.
  • Identifying and notifying heirs.
  • Paying outstanding debts.
  • Liquidating assets.
  • Filing final tax returns.
  • Responding to any claims on the estate.
  • And possibly more, depending on your specific financial issues.

As you can see, probate is no simple affair. It can take months to complete, and it may generate sizable costs. Your executor will have to pay court and legal fees out of your estate’s assets. He or she may have to pay lawyers, accountants, real estate agents, and more. There could also be costs to pay your outstanding debts and taxes.

In some cases, families have to sell treasured assets to generate the liquidity to pay probate costs. Your family may have to wait months to receive their inheritance and, even then, they’ll receive what’s left after probate expenses.

How does an annuity protect your loved ones from probate?

An annuity can be a helpful solution for minimizing the impact of probate. Annuities have beneficiary designations. That means you name one or beneficiaries who should receive your annuity assets after you pass away.

When you die, your beneficiaries fill out a claim form and submit it to the annuity company. The annuity company then processes the claim and delivers the appropriate share of the annuity death benefit to each beneficiary.

Financial tools with beneficiary designations, such as annuities, life insurance, IRAs, and 401(k)s, bypass probate altogether. Those assets aren’t included in the estate and they aren’t used to pay probate costs. They can also be distributed immediately, even if the rest of the estate is still tied up in probate.

Ready to develop a strategy to maximize your legacy? Let’s talk about it. Contact us today at America’s Annuity. We can help you analyze your needs and create a plan. Let’s connect soon and start the conversation.