How to Manage Your Estate Planning

Proper estate planning is essential in order to ensure that your affairs are handled and your assets are distributed according to your wishes. Failing plan for your estate can have devastating consequences for your surviving heirs. Even a simple will can alleviate a lot of problems, but, depending on the size and composition of your estate, there may be several aspects of your plan that needs to be managed in order to ensure it complies with your intentions as well as the law.

This is not to say that estate planning has to be complicated, nor does it say that estate planning is only for the wealthy. Anyone with assets such as a home, a savings account, a business and the need to preserve the estate for the benefit of surviving heirs needs to manage their estate affairs. For most estates there are a few straightforward arrangements that can be made with minimal expense. An attorney may need to be consulted if the estate is of the size that attracts Uncle Sam’s attention for tax purposes, or if there are complicated arrangements involving family members.

To effectively manage your estate planning there are four areas that should be addressed: 1) Transferring your assets; 2) Minimizing your estate costs; 3)Taking care of love ones; and 4) Managing your affairs when you no longer can.

Transferring Your Assets

The first consideration for managing your estate plan is to ensure that your assets are passed on quickly to your heirs with minimal entanglement with the court. There are several tools at your disposal with which to accomplish this.


A will is a legal document that communicates your intentions for asset distribution, guardianship of minors, and who is to execute your will. Upon your death, your will becomes a part of probate proceedings wherein a court will consider it along with anyone who can demonstrate that they have a financial interest in your estate. The probate proceeding is not closed until the court answers all claims, which may or may not be valid. Once proceedings are closed, the executor can distribute the assets. This can be a slow process, but at least it does ensure that your wishes will be carried out.


Instead of, or in addition to a will, you can establish a trust, name a trustee, and then have your assets transferred to the trust. The trustee will manage the assets for the benefit of the trust’s beneficiaries. The main reason this is done is to prevent the assets from being subject to probate proceedings allowing them to pass directly to the beneficiaries. Trust arrangements can also be made to minimize the estate’s exposure to taxation.

Minimizing Your Transfer Costs

The settlement of any estate typically incurs certain expenses including probate fees, legal costs, and state or federal taxes. Properly planned and managed, an estate can be arranged to minimize many of these costs.

Avoiding Probate

By creating a trust, assets can be transferred to the trust and beneficiaries designated who will receive the asset directly from the trust thus avoiding probate. The simplest and less costly trust to use for this is a living trust. Also, any asset that transfers by contract, such as annuities rates, life insurance, qualified plans will pass directly to the named beneficiaries.

Avoiding Estate Taxes

There are a number of techniques and arrangements that can be applied which can help reduce your assets exposure to taxation.

Marital Deduction – Each spouse can gift an unlimited amount of their portion of the estate to each other

Lifetime Gifts- By making qualified lifetime gifts of up to $13,000 to family members each year, these assets will be excludable from the estate

Charitable Gifts – Gifts of assets made to charity during your lifetime or from the estate are also excludable from the estate.

Credit Shelter Trust – Each spouse is given a “credit” in their half of the estate of $1,455,800 (currently). The trust is designed to ensure that this credit is fully utilized thereby making the full amount of the surviving spouse’s credit available to him or her.

Taking Care of Loved Ones

A critical aspect of managing your estate plan is to ensure that your loved ones will have the financial security they need.

Life Insurance Plan – Life insurance is vital to the estate plan to provide the liquidity your surviving family needs. Estate settlement costs should be considered along with the family’s capital needs when determining the amount of life insurance coverage.

Guardianship – Arrangements must be made for minors and family members with special needs. Guardianship arrangements should be reviewed regularly to update based on changing family circumstances.

Professional Management – If the estate includes investments such as stock portfolios or income properties, it may require a professional manager to maintain them for the benefit of the family.

Taking Care of You When You No Longer Can

The changing reality of medical advances that result in living through critical illness and other forms of incapacitation has created a whole new level of planning needs without which could result in devastating financial consequences for the family. The only time to manage this critical aspect of your estate plan is when you are young and healthy.

Long-Term Care – The costs of long-term care, either through nursing homes or home care, are constantly rising and, if needed, could wreak havoc on the family and the finances. Long-term care insurance, purchased at a young age can be the most cost effective way to cover these costs.

Living Will – A living will directs medical decisions when you no longer can. Any desire to maintain or withhold medical care at a critical decision point is communicated through this directive.

Durable Power of Attorney – This is legal document that authorizes a person or persons to make key financial and medical decisions should you become incapacitated.


Managing an estate plan is not just about making final financial and medical arrangements. Because your financial and family situations are constantly involving, it is a lifelong process that incorporates changing circumstances, preferences, and desires. Keeping your estate plan current is just as vital as managing your current financial plan. Working with a qualified estate planning specialist can save your estate a lot of money and your family a lot of extra grief.

How To Sell Annuities

In this first decade of the 21st century we have seen resurgence in the popularity of annuities. The aging Baby Boomer population, caught between the recent ravages of their retirement portfolios by the financial markets and the very real prospect of living beyond the average life expectancy, are rediscovering the many benefits of annuities as a secure retirement planning vehicle. And, while most of them are going into their annuity purchase with eyes wide open as to their liquidity constraints, circumstances do change and what was a good investment choice at the time, might not continue to fit your needs. So, for some people, it may be necessary to try to sell their annuity.

But wait. We were told that annuities are illiquid especially after they have been annuitized and the income payout has begun. We’re told that once we begin to receive income, our principal balance is irrevocably retained by the insurance company. While this may be true in terms of your contract relationship with the insurance company, the fact is that the growth in annuity popularity has spawned a robust secondary market driven my investors who are willing to pay cash for guaranteed income streams.

Sell Your Annuity with Eyes Wide Open

Selling an annuity is not a simple transaction; after all you are selling a contract, not a marketable security. It usually requires legal assistance which, in and of itself has spawned a whole industry dedicated to creating a secondary market for annuities. Some of these companies are direct investors in secondary annuities and others act as brokers to find annuity buyers. In either case, offers are made to the annuity owner based on a “discount” of the value of the annuity.

For income annuities this is a calculation of the present value of the total amount of income that the contract was expected to pay. An interest rate assumption that is favorable to the buyer is used in determining the discount, and ultimately, the amount of cash that will be offered. The higher the interest rate assumption used, the less cash will be offered. It can be a somewhat convoluted transaction which is why it is important to work with a trusted source. It would also be important to work with someone with access to the secondary market that is able to attract multiple offers.

Three Essential Steps to Selling Your Annuity

Selling an annuity is sometimes necessary due to changing circumstances, however, it should be considered as a last resort. We have always urge investors to go into an annuity investment with eyes wide open, after careful consideration of their financial situation. For annuity owners contemplating the sale of their annuity, we urge the same thorough deliberation through three essential steps.

Think it Through

The decision to sell annuity requires at least as much deliberation as the decision to purchase one, if not more. The income from an annuity, unlike from any other source, is secure, predictable and, for many annuity owners, it is their safety net. The decision to sell an annuity is typically made when it has been determined that future income needs are not as great as the need for immediate cash. Or, after a thorough evaluation, you found that you could achieve a better overall return on your money in an alternative investment that still fits within your risk comfort range.

You may also want to consider whether a partial sale of your income would better fit your needs. If you determine that you don’t need the full amount of your monthly income payment, you could sell the income portion you don’t need for a lump sum payment. The key is to thoroughly analyze your current and future income needs in order to make the most prudent decision.

Reach Out to Your Annuity Provider

While most immediate annuity contracts are very limited in their redemption options, it would be important to find out from your provider what if any options might be available to you. If your annuity is still in the accumulation phase, it is usually just a matter of knowing where you are in the surrender period. You are able to surrender your deferred annuity at any time; however, it may subject to surrender fees. If you are in the income phase, and have already received payments, there usually are no surrender options available.

Although your annuity provider may not be able offer any solutions for you, they may be able to offer some advice for going into the secondary market.

Thoroughly Investigate Secondary Market Buyers

You have probably seen their commercials on TV, firms that offer to pay you cash for your structured settlements and annuities explained. A Google search for annuity buyers will reveal a whole string of companies that will make the same offer. As with any financial consideration, you need to take all necessary steps to investigate the legitimacy and integrity of these firms, and not just one or two, but at least three or four.

Your best bet is to get a recommendation from someone you trust, otherwise, be prepared to ask a lot of questions and observe how willing they are to inform you without pressuring you into action. The true professionals in this market will offer you a free, no obligation analysis of your annuity, its fair market value and the prospects for a successful transaction.


Annuities remain one of the best retirement planning vehicles available, especially when used in concert with a well coordinated portfolio of investments, but financial circumstance and investment needs do change which may require a change in your portfolio. Selling an annuity is a key investment decision that requires as much planning and analysis as the decision to buy one. The good news is that the annuity market is so popular that there are buyers who will pay a fair price for your annuity.

The Best Annuity Rates

With the proliferation of fixed annuity products on the market, annuity rates have become commoditized, meaning that they are the primary means by which investors select their annuity products.  Annuity rates are so competitive that investors are drawn to the annuity with the rate that is two tenths of one percent higher than all of the others, and with that, they are satisfied that they secured the best annuity rate.  The problem is that there are so many facets to annuities and their rates that simply evaluating them by the current rate does not necessarily uncover the best annuity rates.

Annuity rates have always been competitive with other fixed yield vehicles such as bank CDs.  It’s fairly easy to find a fixed annuity offering a higher rate than a CD.  The real competition is among the hundreds of annuity providers all vying for the same investor deposits and their marketing and sales practices have become fierce.  It is recommended that, before jumping on the next big rate, investors dig beneath the flashing promotional rate and consider some other key factors that can have a much greater impact on the long term performance of the annuity.

Getting the Best Annuity Rates

Rate Guarantee Period

Most fixed annuities guarantee a rate for a specified period of time.  As it is with bank CDs, the longer the rate guarantee period, the higher the rate guarantee.  Because annuities are long term investments, it might make sense to consider the longer term rate guarantee in order to get the best rates that are available.  It would be important to read the fine print on these rate periods because, in some cases, the rate period doesn’t always equate to the actual guarantee period.  On balance, it might make more sense to accept a slightly lower rate that is secured with a guarantee for the whole period.

Post-Guarantee Rate

After a guaranteed rate period ends, the rates are recalculated based on a stated formula and they are subject to change each year going forward.  Space doesn’t allow for a more complete explanation of these formulas. Suffice it to say, that it is important to understand how the formula works, whether the formula itself is subject to change and how it compares to other annuity contract formulas.  Being lured into a high rate annuity can really sting later when you find out that the extended annuity rate is well below the market.

Minimum Rate Guarantee

Also buried in the fine print is the minimum rate guarantee that provides investors with an out should the current rate ever fall below it.  The only real consideration here is how high the rate is as compared to other annuity products.  Obviously, the higher the minimum rate guarantee, the better the annuity contract.

Premium Bonus Rate

Annuity providers offer higher rates as an incentive keep you investment with them long term. They also offer rate bonuses of as much as a half a percent to encourage larger deposits.  For many annuity products the break point for higher rates starts at $100,000. Some can be found with lower breakpoints of $50,000 or below.  A half point rate bonus could be very meaningful on investments of that size so it would be important to consider the advantage of larger deposits.

Early Surrender Fees

As another incentive to encourage a long term investment horizon, most annuity providers incorporate a surrender fee schedule that penalizes withdrawals made in the early years of the annuity contract. The fees can range between 4% and 10% of the withdrawal amount depending on the year it is taken.  A typical surrender schedule establishes a high rate in the first year which declines by a point in each subsequent year until it vanishes.  Contracts with low surrender fees and/or short surrender schedules can be an appealing offset to a slightly lower initial annuity rate. However, if you don’t anticipate any possibility of taking an early withdrawal, then this might not need to be a consideration in finding the best annuity rates.

The Best of the Best

Annuities have always been considered to be among the safest investments.  Their safety, however, is inherent in the financial strength and stability of the life insurance company that issues the contract. In touch economic times it’s possible for a company to face some difficulties in meeting some of the stringent legal reserve and capital surplus requirements imposed upon them by the states.  While there has yet to be an annuity contract holder who has ever lost any money, investors would be well –advised to work with the top-rated companies (as measured by A.M. Best and Standard and Poor’s).  The more financially strong and stable a company is the more likely they are to be able to maintain competitive rates well into the contract term.


For many people, it’s not difficult to get caught up in the frenzy of high annuity rate promotions.  The aggressive practices of some insurers to attract more deposits can be very enticing; however, insurers that offer the highest rates may also do more to protect their profits by offering fewer guarantees and lower extended rates.  To truly find the best annuity rates, it is important to look under the hood to see how the engine really works.


Highest Annuity Rates

Sales of fixed annuity products have surged in the last couple of years as more investors are yearning for greater stability and guaranteed returns for their retirement portfolios. Billions of dollars that were once churning away in the volatile stock market are now flowing into annuities in search of some certitude. And, while their objective may have shifted from seeking a return on their principal to seeking a return of their principal, many annuity converts are still hoping to get the highest possible annuity rates.

Getting the highest annuity rates is a little more involved than simply combing the internet and flagging the top rates being promoted by overly aggressive annuity providers.  They know you’re coming so they are putting their best rate forward in the hopes of luring your investment dollars in for the long term.

Unwitting investors have often found themselves locked into an annuity that started off with promise but then performed disappointingly after the high rates were replaced with more anemic yields.  In this extremely completive annuity marketplace, it’s best not to jump in head first to a high rate annuity. Rather, a prudent toe-in-the-water approach is more likely to yield a better long term performance.  There are several factors to consider when looking for the highest annuity rates.

How to get the highest annuity rates

The important thing to remember is that annuities are long term investment. One year of high rates does not a solid performing annuity investment make. There are several moving parts in an annuity that can influence its long term performance, and that could mean the difference of thousands of dollars for your retirement portfolio. The prudent course for annuity investors is to look beyond the teaser rate lure and consider all of the factors that go into an annuity’s rate structure.

Go long

Annuity providers are most interested in capturing your dollars for as long a term as possible. There’s little profit for them if you suddenly feel compelled to withdraw your funds before they have had a chance to earn a good return on them over the long term.  As such, many annuities offer a multi-year rate guarantee as an incentive to stay put with your funds.  Rate guarantees can extend out 15 years in some cases.

Generally, these multi-year rates are much higher than one year rates. The longer the rate terms the higher the rate guarantee. The difference between a one-year term and a ten-year term can be as much as 3 points.  You may find some annuities that offer a very high one-year guarantee and then a lower rate guarantee for the remainder of the term. The key with these rate structures is the total yield to surrender which assumes that you will keep your funds in the annuity for the duration of the term.

Two big cautions: Read the fine print on the guarantee as some annuities may offer a long term (five to ten year) rate, but only the first few years are guaranteed.  Also, if interest rates and market yields begin to rise, you risk being locked into a below market rate.

Go big

Annuity providers want as much of your investment dollars as possible, so they will provide an incentive for you to make larger deposits in the form of bonus rates or higher rate guarantees.  The rate differences can be as much as one to two points.  The rate breakpoints generally occur at the $100,000 and $200,000 deposit level, so the difference of even one percentage point can be significant in terms of the amount of earnings over the term.

High Rates versus Flexible Terms

While the goal is to obtain the highest rate possible, investors need to consider all of their needs, concerns, and preferences when selecting an annuity. High returns generally come with some additional risk or inflexibility. Some investors may prefer more flexibility in the terms of an annuity and would be willing to sacrifice a half point in the rate to get it.  Most multi-year rate guarantees have a correlating surrender period that prevents investors from withdrawing funds without incurring a charge.

The surrender charge can start out high, in the 7% to 12% range and then decline by a point each year until the surrender period ends.  Some investors may prefer annuities with shorter surrender periods or smaller charges. While there are annuities with more flexible surrender terms, their rates tend to be lower as well.  Investors who spend the time to compare enough annuity  terms and rates can usually find ones that achieve the right balance for them.


With hundreds of annuities to choose from, investors who take the time to compare them and evaluate annuity providers should be able to find an annuity that offers the right combination of high rates and flexible terms offered through a solid, financially strong life insurance company.  The competition for investment dollars is fierce, so there is little that separates annuities offered through financially sound companies and the ones being aggressively marketed with high teaser rates by less sound companies except the peace of mind knowing your investments are safe.


Alternatives to 401(k)

Since their introduction in 1978, 401(k) plans, have become the predominate vehicle for retirement savings and have become the foundation for a secure retirement for millions of Americans.  Offered by employers as an inducement for employees to systematically save for retirement, 401(k) plans provide plan participants with tax advantages, investment choices, flexibility and the best opportunity for accumulating the large chunk of money they will need to retire in comfort.  You will find no argument from among financial planners that, anyone with access to a 401(k) plan should take full advantage it for all it can offer.

401(k) plans are tax qualified plans which means that contributions are made on a pre-tax basis, and the earnings are allowed to accumulate without current taxation. This provides plan participants with a unique opportunity to maximize their returns by saving immediately on income taxes and by postponing the taxes owed on earnings.

The Limiting Effect of 401(k) plans

As great as 401(k) plans are, they contain some provisions that some investors may find somewhat limiting on their road to maximizing their retirement income which could lead some to exploring alternative means to accumulating retirement funds, not necessarily as  a replacement for their 401(k), but, rather, as a supplement.

Contribution Limits

The first limitation of 401(k) plans is the cap on annual contributions presently set at $16,500. While this is may be a significant amount for most people, some have the means and the desire to contribute more towards their retirement.

Annuities may offer the best opportunity for pre-retirees to maximize their retirement savings in a tax advantaged way. As a non-qualified retirement savings plan, annuity contributions are made with after-tax dollars, but they provide the same tax deferral on earnings as a qualified plan such as a 401(k).  Additionally, there are no limitations on the amount that can be contributed to annuities.

Peace-of-Mind Limits

For investors who are still feeling the sting of declining 401(k) values as a result of the recent market turmoil, annuities offer the unique advantage of protecting your principal from market declines. All annuities offer a death benefit that is at least equivalent to your original principal. And some variable annuities, which enable you to participate in the higher returns of the stock and bond markets, include mechanisms that limit or eliminate the downside risk as well.

Perhaps the most tragic result of the recent stock market declines and volatility was the decimation of account values in millions of 401(k)s.  In the wake of that financial storm, it became apparent to many pre-retirees that they no longer have the funds to be able to generate a secure income for their lifetimes.  Managing a lump sum of money for a lifetime of income has always proved difficult for retirees, and now, as those lump sums have shrunk, it becomes even more difficult. As a result, more employer sponsors of 401(k) plans are turning towards annuities as an investment choice for plan participants.

The notion of managing a large asset for income purposes was never a concern for people who retired with a pension, or a defined benefit plan that, essentially, produced a guaranteed stream of income for the life.  As defined contribution plans, such as 401(k)s have replaced defined benefit plans, the onus of managing the money for income has fallen on retirees, most of whom are ill-equipped for the task.

Annuities as an Income Security Alternative

Annuities are the only investment vehicle that can replicate the guaranteed income property of a defined benefit plan, so, in response to the precarious position in which their employees find themselves, employers are adding annuities as an alternative investment choice.  This is because annuities, when annuitized, or converted to income, will generate a secure and predictable stream of income that cannot be outlived.

If your employer doesn’t offer annuities as an option, it may be worth considering adding some to your portfolio outside of your 401(k) plan.  Or, for those who don’t have the means to make additional investments outside of your 401(k), it might even make sense to divert some of your contribution to a non-qualified annuity in order to build in an income safety net. The advantage to owning annuities outside of a 401(k) is that you will still benefit from the tax deferral on earnings, and, they can be accessed at any time in retirement, for withdrawals or as an income stream without regard to the Required Minimum Distribution* rules that apply to 401(k) plans.


You would be hard pressed to find a financial advisor who would advise against taking maximum advantage of your 401(k) for all of its tax benefits and ease of investment, however, in the face of decimated retirement accounts and continued economic uncertainty, more advisors are pointing their client towards annuities for the ultimate in retirement income security.


*The Required Minimum Distribution from qualified retirement plans was temporarily suspended by Congress for 2009 due to the economic downturn.