Personal Insured Annuities in Estate and Retirement Planning

Here’s the issue:

Your investment portfolio includes interest-bearing investments such as GICs, term deposits, bonds and bank accounts. You’re using the interest earned by the investments to supplement your income. You want to maximize the income you’re receiving today, while preserving your investment capital to make a gift when you die.

If your situation is similar to the one described above, you might want to consider the Insured Annuity financial planning strategy. This strategy is designed to give you increased income today, while ensuring funds are available to make a gift when you die.

Here’s how the Insured Annuity works:

You liquidate your interest-bearing investments and use the resulting cash to purchase a life annuity contract.

You also purchase a life insurance policy with yourself as the life insured.

Once you’ve purchased the annuity, you no longer have direct access to the cash within it. Instead, the annuity generates a payment stream that is used to pay the life insurance premium and the tax on the annuity. The remaining amount is used to supplement your income.

The beneficiary of the life insurance policy is someone you have named, such as your spouse, child, or favourite charity. When you die, the beneficiary receives the insurance proceeds tax-free.

The benefits of the Insured Annuity:

• Increased cash flow to you while you’re alive.
• Insurance benefits that can be gifted at death.
• Ability to fully guarantee the insurance and annuity benefits.
• Potential to reduce tax payable on investment income.

Insured Annuity Vs. Interest-Bearing Investment

• Personal information: Female, 70, Non-smoker
• Funds available to purchase annuity: $500,000
• Term-to100 death benefit: $500,000
• Personal tax rate: 45.00%
• Before tax alternative investment rate: 5.00%

With the Insured Annuity, annual net cash flows increase by 47%.

To contact a Financial Planner about the use of annuities in Estate and Retirement Planning