So, you asked how many beneficiaries you can have on an annuity. I mean, you must be from the South like I am. I'm from the Charlotte, North Carolina, area originally. I don't live there now, but my family is back there, and we have a huge family. I was thinking about that question, and while writing this blog, I'm like, "Hey, that makes sense. I'm assuming you've got this huge family." How many people can you put down on the annuity? The short answer is as many as you want. I want to go further into that and explain how to layer beneficiaries within an annuity.
Even though it's revocable, meaning you can change it at your whim because you're the annuity owner, the short answer is you can have as many humanly possible. You can fill out form after form, and I have seen a ton, like families with 20 kids and grandkids. I've seen and done those forms for my clients, making sure that the annuity will go in those percentages. But hang in there with me. We'll go through some scenarios that apply to you, and we may evoke a question that you'll contact me, and we'll put something together for you.
Once again, how many beneficiaries can you have on an annuity? Infinity is the answer to that question; you could have as many as possible. If you're thinking about getting an annuity or you might already have one, and if you do already have one, now you know that you can change the beneficiaries on it. So, let's talk about that.
You have an annuity, and this is typically how I see people structure it. I'm assuming you're married. You have a spouse, you have kids, and you have grandkids. And let's just say you even have a trust. Here's what you do from a beneficiary standpoint, you can choose any percentage you want. You can say 50% to the spouse or 50% to the kids, but typically what I see is the spouse will be 100% primary beneficiary. As long as that spouse is alive, they will get the full proceeds of the annuity that you list them as beneficiary. Then I see that the kids and this'll typically be a hundred percent, and you could split it. If there are five kids, it's 20% each. If you like one kid better than the other and want them to fight after your death, do what you want. That's secondary beneficiaries. Then you have grandkids, and this could be 100% tertiary, meaning three. So you die, spouse is alive, and they get the proceeds. You and your spouse die simultaneously, and the kids get the proceeds. How about this? You and your spouse are alive, and somehow the kids pass away, then the grandkids are going to move up to secondary.
Using a Trust
Does that make sense? Now, to throw one more wrinkle into this, you might have a trust set up, and trust, if you're not familiar with it, and you probably are, all that is a legal document that dictates how you want the money to be distributed upon your death. In lieu of putting all of this in place, many people have the trust as the beneficiary, and a lot of the annuity companies allow you to do that. They'd need a copy of this trust, etc., but we can help you with that if you become a client of The Annuity Man. That's how that happens. Okay? Some people just choose a trust. Some people choose the percentages based on primary, secondary, and tertiary. And once again, this is all revocable, not irrevocable, revocable. You can change this at your whim.
We can help you with all of the forms needed. What I would tell you to do is if you have annuities, always revisit the beneficiaries to make sure that it's in line with what you're thinking, just kind of like you revisit a trust every year just to make sure that the distribution of your money is going to be on your terms and you can control it from the grave because that's in essence what you're doing when you list out beneficiaries.
I was talking to a client the other day, and he was concerned because everyone says their family's always going to get along, and everything's going to go hunky dory. Let me tell you something, and I think you understand this: when it comes to money, nothing goes smoothly, especially with family. He was concerned that there would be an argument about the percentages when he passed, and I thought what he did was fair and that it would be challenged. Now here's the interesting part about the annuity side and listing of beneficiaries. When you die and list your beneficiaries, that annuity passes probate free. I mean, you're not going to have issues. They can't frivolously sue, but it's pretty locked tight from the standpoint of your wishes because it's in writing, legal tender within the application, and reflected in the policy. So, I told him not to worry about it, let them fight it out, and write them a little note to quit their bitching about getting money because a lot of people aren't as fortunate enough to have that type of legacy and inheritance coming their way. Hopefully, that's not your family. I've seen it happen; believe me, I've seen it happen with families that say, "Hey, it'll never happen to my family." It might. The beneficiary side is important because you can set it up to ensure that the money will be distributed exactly how you want it to be distributed.
Hey, thanks for hanging in there with me. I did a video on what surrender charges are with annuities. Since we're talking about beneficiaries, you should understand the surrender charge penalties and periods and how that all works with specific types of annuities because that coincides as well. In the majority of annuities out there, when you die, if there are surrender charges left in the policy, those are wiped away clean, the vast majority. Some are not, but I cover that in that video, which coincides with this blog. Lastly, if you want to see something specific on your goals and portfolio, let us put together a customized plan for you. Don't hesitate to book a call with me, and I will dedicate 30 mins for you, no strings attached. Thank you for joining me on another weekly blog, and I hope to speak with you soon.
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