Retirement Tips: How to Leave Money to My Grandkids

So, for all of us old fogies out here, we want to know how to leave money to our grandkids. I've got some ideas for that. That's the retirement tips blog that I'm doing today. But with 10,000 baby boomers reaching 65 every day and that retirement age, you start thinking, "How am I going to leave money to my beneficiaries?" And a lot of people are looking at how to leave money to their grandkids. We're going to go into that. And by the way, I am Stan The Annuity Man, America's annuity agent, licensed in all 50 states.

Before we start, I'd like you to go to my site, The Annuity Man and sign up for my books. You can download them for free and under no obligation. They're owner's manuals on all types of Annuity products, some of which we'll cover today about leaving money to your heirs and grandkids. But The Annuity Man is also a place to schedule a call with if you have any questions on annuities.

So, there are a few ways to leave money to your grandkids. By the way, I don't sell life insurance. Annuities are issued by life insurance companies, but life insurance is a different product. That is still the best transfer wealth product out there because the money goes to your beneficiaries in tax-free lump sums. I have a ton of life insurance on me, but I just don't sell that. That's the best legacy product. But with annuities, you can do some legacy planning as well.

Client Example

A lot of people come to me, and I had a call the other day that said, "Stan, I don't want to lose a penny more. I'm tired of the market. I'm tired of the market volatility." People get to the retirement age and just don't want to deal with it or have someone manage it. And he goes, "I just don't want to lose a penny and whatever accumulates, I'm just going to leave to my beneficiaries and my grandkids." I said, "Well, we're down to two products."

Multi-Year Guarantee Annuities and Fixed Index Annuities. Both of those are CD-type products. I know people say, "Well, Indexed Annuities, aren't those market products?" No, they're CD products, and we'll discuss them briefly. Multi-Year Guarantee Annuities are the annuity industry version of a CD. You lock a specific interest rate in for a specific period that you choose. I have a live feed of the best rates and all carriers at The Annuity Man. You can check those rates 24/7/365 They change all the time, and we're updating them.

Protect the Principal

But that's, in essence, a way to do it. You could say, "Hey, I'm getting this interest rate, and if I die, the kids, you can list them as beneficiaries of the policy." And that's one way to leave it. Indexed Annuities or CD products as well. The interest part of that, which is what's credited to your account, is attached to a call option. But Indexed Annuities are going to return CD-type returns. Principal protected in a non-IRA account, just like MYGA's in a non-IRA account, the interest compounds tax-deferred, and you can leave that money, the principal that's protected, plus the interest earned to your beneficiaries on the policy. By the way, beneficiaries can be changed on annuity policies at your discretion as much as you want. If they make you mad, you can change them. That's one way to leave money to your grandkids. Protect the principal and earn interest.

Life Insurance

All right, so get a call the other day, and the guy said, "Stan, I want to leave money to my heirs, my grandkids, and kids, but I can't qualify for life insurance." Life insurance is an underwritten product. You have to go through medical testing, blood testing, and some nurse shows up at the house. I always tell people that life insurance companies have big buildings for a reason: because they want to ensure healthy young people. But a lot of people out there cannot qualify for life insurance. So, what's the next step? They need something guaranteed issue. They need something that doesn't require any type of blood test or medical records or anything like that. Is there such an animal for that? Yeah, there actually is.

Death Benefit Rider

Is it better than life insurance? No, of course not. Life insurance is the best legacy product out there because it goes lump-sum and is tax-free to the beneficiaries. But for people that can't qualify for that, there are what's called Income Riders that provide a death benefit. In essence, a death benefit rider. You can attach that death benefit rider to a policy like a Variable Annuity or Indexed Annuity. The highest contractual ones I've seen are on Indexed Annuities to where it grows by a specific percentage, that rider, that can be left to the beneficiaries as a death benefit.

Now, they're going to have to pay taxes on that, but heck, you're dead. Who cares anyway? I'll give you an example. If you draw a line down with a blank sheet of paper like this. Accumulation Value, Indexed or Variable Annuity on the left. But the death benefit rider on the right side could grow by, say, 5%, 6%, 7% and just grow, grow, grow until you die. And when you die, that money is paid to your beneficiaries. Some policies will allow the beneficiaries to take that money over a five-year time period to lessen that tax hit. But the bottom line is if you are in bad health or poor health or just normal, not perfect health, like a lot of us, you can get a guaranteed issue policy, attach what's called a death benefit rider, which is a version of an Income Rider, and leave money to your grandkids and kids and not have to go through all that underwriting.

Legacy Income Monster

The final strategy to leave money to your kids, grandkids, beneficiaries, and heirs is to set up a guaranteed lifetime income stream for them or an income stream. I got a call the other day, and it was from a guy in his mid-80s; I think he was 82 at the time we issued the policy. But he wanted a joint life policy, an Immediate Annuity with his five-year-old grandson. Think about that. He's in his eighties, the kid's five. So, the primary pricing mechanism is life expectancy on these policies. It was primarily priced on that five-year-old. It was joint life. But the bottom line is when the eighty-something person dies; the income stream continues for the rest of that five-year-old's life. Every single month, that kid was going to get an income stream for the rest of his life. Talk about legacy. That is a long-lasting legacy strategy that he came up with.

I call it the legacy income monster because it is a monster. Some carriers will allow you to do that, and some will not. But what I want to put in the back of your head is the fact that you can structure it so that when you're in the grave, when you're dead, or when you've been cremated, you can leave that income stream to your beneficiaries. For example, if you said, "Stan, I just want to buy a thirty-year period certain." In other words, it's going to pay income for 30 years to somebody. Let's just say you died in year five; there are 25 more years of payments to your beneficiaries. You could set it up to where it's life with a ten-year certain, life with a twenty-year certain, or life with a thirty-year certain.

What that means is it will pay for the rest of your life, but when you die, whatever's left in that period will go to your beneficiaries. The bottom line is that all of these are customizable. You need to go to The Annuity Man to schedule a time to talk with us one-on-one; tell us what your situation is from a legacy standpoint and what you want to achieve, and we will shop all carriers. I'm licensed in all 50 states. I'm the top agent out here. We'll look at your specific situation, quote all carriers, and come up with some customizable plans and strategies for your specific situation that I think you'll be very happy with. If you want to leave money to your heirs, annuities, or contracts, we can structure that contract to satisfy your needs, goals, wants, etc. And those kids will be happy.

Are annuities perfect? Does everyone need one? No. Do you already own one? Yes. It's called Social Security. But they are contracts. They're not investments, in my opinion, because you're going to get a contract in the mail. It's called a policy. You better understand how that contractual guarantee works. But more importantly, you need to come to us and say, "Hey, The Annuity Man, talk with me." And we're going to go over your specific situation. Tell me about your kids. Tell me about your grandkids. Tell me about how you want the money to flow when you are in the grave. Does that mean their controlling your assets from the grave? Yeah, kind of; if you're a control freak, that's great. But if you're just a good person, the leader of your family, you want to make sure that the money is going to be distributed the way you want it to, then annuities are an excellent way to do that because they're contractual and we can set up that contract to make it work for you.

Thanks for joining me today. With that being said, I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.