If you're creating a will and want to make sure your beneficiaries have money for years to come, you've probably considered filing your will with annuities. Annuities are paid each year, and they are usually for a certain dollar amount. Why would you choose an annuity instead of working out a lump sum for each family member? There are a few benefits to annuities to consider.
Taxes Can Be Reduced
Taxes are a big issue when people receive lump sums of money. For instance, if you make $20,000 a year and suddenly get a payout for $50,000, you're going to be in the $70,000 tax bracket. That has a huge impact on your finances and will likely mean you pay more in taxes. However, if you leave your loved one an annuity of only $5,000 a year, making $25,000 instead of $20,000 won't be a large jump in income; the individual may pay less tax or pay enough tax out of their work income to cover the taxes on the annuity completely.
Payments Are Guaranteed For Years
If you want to make sure your loved one is provided for, a lump sum can seem like a good idea, but it's also too easy for someone to spend it all in one place. An annuity means they don't get all that money at once, but they will have a guaranteed income for the number of years specified. Here's an example: If you have three children who you want to be able to pay for college and then later be able to afford a home, leaving them annuities of $10,000 each per year for 20 years could allow them to do both comfortably, even if they spend $10,000 quickly one year on a splurge. Invested correctly, the annuities could even have the ability to grow with interest, providing a higher payment to your loved one on the final payout.
You Can Spread Out Your Funds and Guarantee Delivery
When you create annuities, you're guaranteeing that someone you love is receiving the money you want them to get. Instead of going through one person who should dole out money according to your will, you can be sure that the wishes you have are fulfilled. If you don't have a large amount of money to split among family members, consider creating annuities for each of them in smaller amounts. Even if it's $500 a year for five years or another small amount, the added income will be welcomed and they will be better off not fighting over who gets a larger chunk of your estate.
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