Mary, a widow, had contributed to her IRA for many years. It grew to over $275,000. She chose to make her contributions to a bank, whose name will not be mentioned, to make sure her IRA would be safe and not exposed to Market risk. Mary had one son, Erik, and a step daughter from her deceased husband. Her bank advisor recommended that she name her estate as beneficiary so her will would pass her IRA to Erik after her death. Sounds reasonable, but this advisor’s advice would eventually cost Erik unneeded time, expense, and risk.

When Mary passed; her IRA became part of her estate and subject to the terms of her will. Her intention was for Erik to inherit all of her assets. When her husband died eight years earlier, he left some of his estate to Mary and a big chunk to his daughter from his prior marriage. In Mary’s mind, it only seemed fair that her son received her IRA and other assets to create balance, in light of the fact, that her step-daughter had already received a sizable amount of inheritance when her husband died.

Neither Mary nor her son Erik, were aware that naming the estate instead of Erik would force her IRA into probate, along with her other assets. Probate can be expensive and during probate, anyone can file a claim for some or all of Mary’s assets, putting Erik’s inheritance at risk. You can guess the rest of the story; Erik’s step sister challenged the will and claimed that she is entitled to some of her step mother’s IRA.

This is not an unusual situation; In fact, it’s common to make this mistake! In this case, Erik’s inheritance is up for grabs.

Advisors Action Plan:

Look for IRA beneficiary documents that are structured for failure. Fix the problem and you will be the trusted advisor.

For more information about IRA training, go to www.IRAkeys.com

Longevity Insurance for IRAs can create a big opportunity for Fixed Annuity Sales. It could offer your IRA prospects a way to defer taking taxable RMDs on a portion of their IRAs until age 85. It will also help insure that they won’t outlive their savings. Please click the link below for Natalie Choate’s full article.

http://www.morningstar.com/advisor/t/52769065/new-longevity-insurance-for-iras.htm

The Obama Administration has given an endorsement to the use of annuities in company sponsored retirement plans. These deferred annuities can offer guaranteed lifetime income so plan participants will be less likely outlive their retirement savings.  Under this new ruling/executive order, 401(k) plan participants will be able to use a portion of their 401(k) plan to  purchase a deferred annuity with the intention of converting it into guaranteed lifetime stream of income at a future date like age 80 or 85.

 The portion that is used to purchase the annuity will not be subject to the normal Required Minimum Distribution beginning at age 70 1/2. We will learn more about this in the coming days and weeks.

There are three aspects of this I like:

1- A longevity annuity and a deferred annuity with a lifetime income settlement option are essentially the same thing. This should create more opportunities for deferred annuity sales. 

2- Those who participate in 401(k) plans will be able to keep a stated percentage up to a dollar limit deferred with NO taxable RMDs beginning at age 70 1/2. Many participants will elect this option to reduce their current taxable distributions in addition to providing income in later years.

3- The consumer perception of annuities will improve.

Stay tuned for more breaking news. For more information about IRA/401(k) Distribution Training, click on the ONLINE TRAINING button below.