Forecasting the of annuity

Forecasting the of annuity

If you've got Microsoft Excel (or just about any other popular spreadsheet program) running on your computer, you can use its FV function to forecast the future value of your IRA account. The FV function calculates the future value of an investment given its interest rate, the number of payments, the payment, the present value of the investment, and, optionally, the type-of-annuity switch.  (More about the type-of-annuity switch a little later.) The function uses the following syntax: =FV(rate,nper,pmt,pv,type) This little pretty complicated, I grant you. But suppose you want to calculate the future value of an IRA account that's already got $10,000 in it and to which you're contributing $200-a-month. Further suppose that you want to know the account balance—its future value—in 25 years and that you expect to earn 10% annual interest. To calculate the future value of the IRA account in this case using the FV function, you enter the following into a worksheet cell: =FV(10%/12,25*12,-200,-10000,0) The function returns the value 385936.13—roughly $386,000 dollars. A handful of things to note: To convert the 10% annual interest to a monthly interest rate, the formula divides the annual interest rate by 12. Similarly, to convert the 25-year term to a term in months, the formula multiplies 25 by 12. Also, notice that the monthly payment and initial present values show as negative amounts because they represent cash outflows. And the function returns the future value amount as a positive value because it reflects a cash inflow the investor ultimately receives. That 0 at the end of the function is the type-of-annuity switch. If you set the type-of-annuity switch to 1, Excel assumes payments occur at the beginning of the period (month in this case), following the annuity due convention. If you set the annuity switch to 0 or you omit the argument, Excel assumes payments occur at the end of the period following the ordinary annuity convention.

If you've got Microsoft Excel (or just about any other popular spreadsheet program) running on your computer, you can use its FV function to forecast the future value of your IRA account.

The FV function calculates the future value of an investment given its interest rate,

the number of payments, the payment, the present value of the investment, and,

optionally, the type-of-annuity switch.  (More about the type-of-annuity switch a little later.)

The function uses the following syntax:

=FV(rate,nper,pmt,pv,type)

This little pretty complicated, I grant you. But suppose you want to calculate the future value of an IRA account that's already got $10,000 in it and to which you're contributing $200-a-month. Further suppose that you want to know the account balance—its future value—in 25 years and that you expect to earn 10% annual interest.

To calculate the future value of the IRA account in this case using the FV function, you enter the following into a worksheet cell:

=FV(10%/12,25*12,-200,-10000,0)

The function returns the value 385936.13—roughly $386,000 dollars.

A handful of things to note: To convert the 10% annual interest to a monthly interest rate, the formula divides the annual interest rate by 12. Similarly, to convert the 25-year term to a term in months, the formula multiplies 25 by 12.

Also, notice that the monthly payment and initial present values show as negative amounts because they represent cash outflows. And the function returns the future value amount as a positive value because it reflects a cash inflow the investor ultimately receives.

That 0 at the end of the function is the type-of-annuity switch. If you set the type-of-annuity switch to 1, Excel assumes payments occur at the beginning of the period (month in this case), following the annuity due convention. If you set the annuity switch to 0 or you omit the argument, Excel assumes payments occur at the end of the period following the ordinary annuity convention.

an explanation of the purpose of life

an explanation of the purpose of life

If you are nearing retirement age then you are likely thinking about purchasing an annuity to provide you with an income after you finish work.  An annuity converts the pension fund that you have built up during your working life into a regular income that will be paid until you die.  There are several different types of annuity policies available to UK consumers.  One such option is a Unit Linked Annuity.

In a standard life annuity you convert your pension fund into a guaranteed income.  Unit linked annuities differ in that the amount of income isn’t guaranteed but is instead dependent on the performance of an underlying unit linked fund.  This type of policy is similar to a with profits annuity in that it has all the same options but the pension fund is invested in a unit linked rather than a with profits fund.

Unit linked annuities can work in one of two ways.  When purchasing the annuity you have the choice of taking out the policy based on an assumed growth rate.  You determine the amount you require the fund to grow at for you to receive the level of income you want.  If the fund exceeds expectations then the annuity income will be increased, however if it underperforms then income will be reduced.  The other alternative is to purchase an annuity with no assumed growth rate.  Instead the income you receive will depend on the performance of the fund in which you invest.

One disadvantage of this type of annuity is that there is often a higher initial charge on setting up the policy.  In addition to the other overall charges this may reduce the amount of income you receive from the policy.  Unit linked annuities are inherently more risky than standard pension annuities and so if you are risk averse and wo

Grantor Retained Annuity Trusts: What it is and How it Works?

One of the most powerful and tax efficient wealth transfer tools in use by the modern estate planner is the Grantor Retained Annuity Trust or GRAT. A GRAT allows a donor (usually a parent) to pass appreciated assets to his children and enjoy the future appreciation of those assets while paying little or no gift taxes.

WHO USES GRATS?

Successful professionals and business owners with sizeable estate tax and estate tax liability might consider a GRAT to shift assets to their children and reduce income and gift taxes. For example: let's say an individual owned a family business valued at $1 million. Let's also assume it is expected to appreciate to $1.3 million over the next two years. He's ready to retire and believes that one of his children is ready to take over running the business. Using a GRAT, the client can transfer this asset to his children and substantially eliminate his tax liability.

HOW IT WORKS

In step one the parent makes an initial gift (the family business from the above example) to a trust. For transfer tax valuation purposes, the amount of the taxable gift is the fair market value of the property transferred minus the value of the grantor's retained annuity interest. The trust is set up as an annuity and the Grantor retains an interest in the assets placed in the trust. The donor receives an annual payment from the annuity for a fixed period of time. At the end of the term, any assets that have not been distributed to the donor are gifted to the children as beneficiary of the trust. If the donor dies before the end of the term, his interest in the trust which is valued as of the date of his death, is distributed to his heirs.

The success of a GRAT is loosely tied to the fluctuations of the interest rate markets. They perform exceptionally well in low interest rate environments. Section 7520 of the Internal Revenue Code prescribes an assumed rate of return which must be used in determining the annuity payouts to the Grantor. Each month, the IRS announces what the rate will be and the rate is subject to change each month. For example: In June 2008, the Section 7520 Rate was 3.8%; In July 2003, it was as low as 3.0% and in May 1989, it was as high as 11.6%. The Section 7520 Rate represents a threshold beyond which the desired benefit of the GRAT is achieved. If the assets contributed to the GRAT appreciate at a rate higher than the 7520 rate, wealth will be transferred to the children tax-free. Below the 7520 rate and taxes will be imposed. For example: If the assets appreciate at a rate of 9%, when the Section 7520 Rate is 5%, the difference of 4% will be transferred tax free.

As the 7520 Rate increases so to must the Donor's annual annuity payment. As the 7520 Rate is decreased, the annuity payment is lowered. Therefore, when the 7520 Rate is higher, the likelihood of transferring assets to the children, is dampened.

TAX BENEFITS OF USING A GRAT

Estate and Gift Tax
There are significant Estate and Gift tax benefits to be acheived, namely the extremely small gift tax. In the example above with the $1 Million family business, the annuity payments will be included in the Grantor's estate. If the Grantor dies during the term of the trust, all of the assets that are held in the GRAT are included in the Grantor's estate.
Of course, if the Grantor survives the two-year term, all of the appreciation during the term, in excess of the Section 7520 Rate, is transferred to the Grantor's children tax-free. At the expiration of the GRAT's term, the assets pass to the Grantor's children (or to a trust for their benefit) will not receive a step up in basis; rather they will have a carry over basis for tax purposes. Therefore, it may be prudent to select higher basis assets for contribution to the GRAT. In addition, it may be possible, in a properly structured GRAT, to "swap" out low basis assets for high basis assets, if appropriate.

Generation Skipping Transfer Tax
GRATs are not the preferred vehicle for transferring assets to grandchildren or great grandchildren because of the generation skipping transfer tax (GST).  The tax liability of a GRAT may not be determinable until the end of the GRAT term. In other words, there's always the possibility that a successful GRAT will produce a GST tax when substantial assets are transferred to grandchildren but the extent of the tax can not be determined until after the GRAT term. Because of this uncertainty with regard to the GST tax, many estate planners shy away from creating GRATs when the donor's grandchildren are the desired beneficiary.

Income Tax
A GRAT is treated as a grantor trust for purposes of the Donor's income tax liability. All of the GRAT's income and expenses are taxed to the Grantor. The key here is that since the GRAT is not liable for taxes. Assets held by the GRAT intended for the beneficiary are not eroded by the payment of income taxes.

This short overview is a very simplified version of a complex planning strategy. GRATs can be excellent tools to pass assets from one generation to another while avoiding or mitigating estate and gift taxes. The potential tax advantages of a GRAT spring from the assumptions used to value the income and assets under Section 7520 of the tax code. The code assumes that the transferred property will produce income equal to a prescribed interest rate and the principal value of the property will not increase or decrease.  If structured properly and managed well, a GRAT can produce significant benefits with very little risk and low costs.

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About the Author

C. W. Hankerson JD,EA

C. W. Hankerson JD EA is a tax adviser and financial planner in Washington DC. His practice, The Equity Financial Group, is devoted to.

What happens to my annuity if I die early on?

An annuity is a policy, bought with the proceeds of your pension fund savings, which pays you an income in retirement until you die. Usually you can choose the frequency of the payments, which can be monthly, quarterly, 6 monthly or annually.

If you die without purchasing any of the available annuity options then your annuity payments will cease.

What are the options?
You can choose a guarantee period which can protect your income if you die early. Normally the choices from annuity providers are a 5 or 10 year guarantee period, however, some will let you choose any number of years up to a maximum of 10 years.

How does the guarantee work?
For example, if you chose a 10 year guarantee period and died after 5 years and 3 months, the annuity provider would continue to pay your annuity income in full for the remainder of the guarantee period; in this example for another 4 years and 9 months. The annuity provider would pay the money either to your:

Named dependant’s as a regular income – if you have a dependants annuity, or
to your estate as an equivalent lump sum if you die before age 75. The lump sum is subject to deduction of tax which is currently at the rate of 35%.

If you die after age 75, then any payments due will be paid as a regular income. If you don’t choose this guarantee your income will stop when you die, even if this happens in the early years.

Can my annuity revert to my partner after I die?

Yes, you can normally specify a financial dependent when you purchase your annuity. Annuity providers normally allow the following: Husband, wife, civil partner or life partner (living together as if married or civil partners and financially dependent on you or in a mutually dependant financial relationship with you).

Another annuity option you can purchase is the continuing pension option. You can choose how much of your pension should continue in the event of your death to a partner; this can be up to a maximum of the pension you were receiving. Most people normally choose either half, two-thirds or all of their income. If you die first, the annuity provider will pay your named dependant an income for the rest of their life. If you have also chosen a minimum guaranteed payment period and die during that time, your dependant’s income will start when payments under the guarantee stop.

What if my partner dies first?
Your income will continue as normal, but no dependant’s income will be payable. Also, you won’t be able to revert to a single life annuity and benefit from a higher income yourself.

What if I get divorced?
Normally your former partner will not be entitled to receive a dependant’s income from this annuity after your death. Nor can you transfer the dependant’s income to any new partner or receive a refund.

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Tony (OM Visions)

Based in the UK, AnnuitySupermarket.com help clients find the best pension annuity quotes from the Open Market and provide annuity

Common Annuity Riders Explained

Before you finalize an annuity contract you need to understand annuity riders and whether in your unique situation a death benefit rider, living benefit rider or increased payment option makes sense.

Death Benefit Rider for Annuities Explained

Some annuities include a rider that acts like a life insurance benefit. Please note that annuity death benefits to heirs have a different tax status than life insurance benefits which pass to beneficiaries' tax free. If you die before you collect the full value of the annuity, the rider pays your heirs the amount you invested plus interest or the market value of the funds minus whatever you have collected in payouts. While the goal of an annuity is often to supplement retirement income most deferred annuities include a death benefit option.

Typically, a death benefit payout is determined by your account balance when you die. You can protect your heirs from declines in the market by purchasing an enhanced death benefit rider, which locks in the account balance periodically. Some immediate annuities don't continue payments to a beneficiary after your death. These annuities provide you with higher payouts while you are still alive.

Living Benefit Rider for Annuities Explained

Living benefit riders are optional and you must request them at the time you purchase your variable annuity. It is unusual for a company to allow you to add a living benefit rider after the annuity contract has been issued. These relatively new options decrease the risk to the variable annuity owner by providing payout guarantees or floors for the risk averse in exchange for a fee. A living benefit option will cost you a fee but will provide a guarantee to protect your variable annuity investment from market declines and provide a guaranteed minimum payout.

There are many types of living benefit riders and you should review these with a trusted financial advisor before determining which if any are appropriate in your situation. Three typical choices are:

• The guaranteed minimum income benefit guarantees a minimum future payout regardless of how the market performs and generally requires the annuity be kept in force a specified number of years before it takes effect.

• The guaranteed minimum accumulation benefit ensures that you retain the value of your purchase payments regardless of your investment earnings. This benefit also requires a waiting period after which if your investment is worth less than your purchase payments, the issuer will make up the difference.

• The guaranteed minimum withdrawal benefit guarantees a return of your purchase payments through fixed annual withdrawals. The annual withdrawals are guaranteed until your principal is returned regardless of your investment earnings.

Increased Payout Option for Annuities Explained

Increased payout or escalating options allow you to purchase an annuity with a payout that will increase either in line with inflation each year or by a fixed percentage each year.

A level annuity payout is the same amount for as long as you live. If you are concerned about inflation an escalating annuity could provide an answer to your worries. With an increased payout option your payouts start off lower, but steadily increase over time. The downside to an increased payout option is that it may take several years for your payout under an escalating annuity to reach a level equivalent to the initial payout on a level annuity payout. You need to carefully consider if this option makes sense in your situation. It may not make sense for older individuals.

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Steven Parsley

Flexible Annuity Options The introduction of annuity options allows you to tailor an annuity to meet your retirement and financial goals and..

Medicaid Compliant Annuity vs. Medicaid Friendly Annuity

With so many annuities for Medicaid planning purposes now being offered by way of insurance agents, financial planners, and insurance companies, I feel that it is necessary to distinguish the products offered by Krause Financial Services from the group.

In recent months the term "Medicaid Friendly Annuity" has been heavily used in the Medicaid Annuity marketplace.  It is important to know that Krause Financial Services does not provide Medicaid Friendly Annuities, nor do we recommend that they be used in converting countable resources into an income stream for purposes of establishing Medicaid eligibility.

With a Medicaid Friendly Annuity, seniors are being advised to purchase a tax-deferred annuity which is nothing more than an investment vehicle and a countable resource.  The senior is then told that at the time he or she should enter a nursing home, the tax-deferred annuity would be annuitized, thus immediately qualifying him or her for Medicaid benefits.

Whereas a Medicaid Compliant Annuity is a planning tool offered by a limited number of insurance companies, and an even more limited number of insurance agents.  The Medicaid Compliant Annuity was designed to convert a spend-down amount into an income stream, and is an immediate annuity that must contain the following provisions:

• it must be irrevocable and non-assignable;
• it must be actuarially sound;
• it must provide payments in equal amounts, with no deferral and no balloon payments; and
• it must name the state Medicaid program as a beneficiary to the extent that medical assistance benefits were provided to the institutionalized individual.

The primary obstacle with a Medicaid Friendly Annuity is that it typically will not contain all the aforementioned provisions upon annuitization.  While annuitizing the tax-deferred annuity will convert the product into an immediate annuity, it most likely will be assignable and will notbe actuarially sound.  Furthermore, in that the Medicaid Friendly Annuity is typically purchased long before the senior even enters a nursing facility and the cost of care is still unknown, upon annuitization the immediate annuity may provide an inappropriate amount of income.

I have heard countless horror stories from elder law attorneys with clients who were sold Medicaid Friendly Annuities and were forced to surrender the policies in that the product did not meet Medicaid eligibility requirements, thus subjecting the senior to obscene surrender charges.  It is extremely important for seniors to exercise caution when considering insurance products advertised as "Medicaid Friendly."

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Dale Krause

Dale M. Krause, J.D., LL.M., has provided Medicaid Compliant Annuities to elder law attorneys, and their clients, throughout the United..

Annuity forecast is vital in the selection of an annuity plan

Annuity is basically a contract that an individual can enter into with an insurance company that assure capital gains in exchange for payment of premium. It is an excellent option to ensure the financial security of post retirement life. People must keep an eye on the annuity forecast, because it can affect the amount of their pension income. 

The importance of annuities is cleary visible in the fact that they cater to the requirements and demands of different investors. This diversity in annuities allow an individual to choose an annuity that provides the maximum possible returns according to his financial requirements. 

There are many UK annuity rates prevailing in the market today. People need to make a comparison of different rates to determine the best one for themself. Pension annuity rates refer to the rates at which the annuity provider (insurance company) determines the amount of income that they will pay to the pension annuity holder in exchange for their hard earned pension fund. Therefore, people need to take utmost care, while selecting pension annuity rate. 

One essential aspect that plays a significant role in determining what annuity rate will the annuitant get, is their estimation of how long that annuitant will live. This implies that pension annuity rates for females are lower as compared to those for males (because females statistically live longer).

Annuity forecast plays a pivotal role in the selection of an annuity plan, out of a wide range of annuity rates. This allow annuity holders to obtain information about how changes in annuity rates will affect their annuity income. Annuity calculators forecast the growth, as well as, payout of people's annuities. Annuities allow people an opportunity to create an investment portfolio that takes care of their short term, as well as long-term, financial needs.

There are numerous annuity rates in UK. Thus, people sometimes get confused as which one to select out of this wide range. In such circumstances, an expert annuity advisor plays a crucial role to help an individual select the best plan.  

UK annuity rates keep on changing according to government policies or market conditions. As there are many annuity programs, people should fully understand features of each pension annuity method to select the one that matches with his budget and requirements. Fixed annuities always assure  fixed amount. On the other hand, variable annuities do not promise a fixed amount, it has potential to provide bigger returns. However, both of these are safe and offer complete financial security.

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johnbrendon

We offer information about UK annuity rates and ensures our clients to receive the most possible pension income. People, who are nearing..

Cash for Structured Settlement: Tips for Selling Annuity Payments

Entering into cash for structured settlement agreements is a complex process that normally takes 2 to 3 months to complete. Annuitants must determine if their state allows the sale of future annuity payments. The majority of states prohibit this practice and those that do require Annuitants to obtain authorization through the court.

Obtaining cash for structured settlement payments could present Annuitants with unexpected tax consequences. When individuals receive annuity payments as compensation for injury, the payments are tax-exempt. However, when Annuitants sell payments for lump sum cash, the funds may be subject to both state and federal taxation.

There are several different uses for structured settlements. The most common use is to provide compensation to individuals who have been injured due to a car accident, medical malpractice, workplace injury, or negligence of another person. Injury settlements are structured to ensure injured parties receive adequate compensation for lost wages, medical expenses, and living expenses.

Courts rarely authorize the sale of injury-related structured settlements because annuity payments are intended to allow Annuitants to maintain their normal standard of living. If Annuitants require lump sum cash for items that will improve their standard of living, courts might allow them to sell a portion of future annuity payments.

Annuitants have many reasons for selling structured settlement payments. The most common reasons are to pay off debts, make home improvements, college tuition, and investment purposes. Although selling annuity payments can be a good option for obtaining lump sum cash, Annuitants must take time to calculate the true costs.

Obtaining cash for structured settlement normally involves court fees, attorney fees, funding source fees, and potential taxation. It is usually less costly to take out a personal loan through a lender.

To sell partial payments, Annuitants assign payment rights for future payments to a funding source. Once the funding source is repaid, payments revert back to the Annuitant. For example, an Annuitant requires $40,000 to purchase a handicap-accessible van. They receive quarterly structured settlement installments of $5,000 and would need to assign payment rights for two years' of annuity payments.

Another consideration of selling structured settlement payments is annuities are underwritten by life insurance companies. In order to assign future payments, Annuitants must obtain permission from the underwriter. Insurance companies are not required to engage in this type of transaction. Even if Annuitants obtain court authorization, life insurance companies can block the sale and refuse to assign future payments to the funding source.

If the court and life insurance company authorizes the sale of future annuity payments, Annuitants must find a trustworthy funding source. This is usually a private investor, investment group, or cash advance provider. Banks and credit unions generally do not provide cash for annuity payments. Some financial institutions might allow Annuitants to take out a personal loan using the structured settlement as collateral.

Annuitants should consider consulting with an annuity broker to obtain the highest offer. Funding sources charge fees when presenting advanced funds. Cash advance fees typically range between 10- and 40-percent of advanced funds.

Annuitants that elect to sell structured settlement payments should comparison shop funding sources to obtain the best rate. Once Annuitants accept an offer from a funding source, they must enter into a contract and file legal documents through the court. Afterward, funds can be distributed to the Annuitant. The overall process of obtaining cash for structured settlement is about 3 months.

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Simon Volkov

Are you considering obtaining cash for structured settlement payments? Learn more about the process before selling future annuity payments..

Pros and Cons of Annuities - Tips For Getting Annuity Leads

When considering annuities as a vehicle for your safe and secure money, several pros and cons likely to become obvious. While annuities may not be for everyone, they can provide benefits not available in any other financial instrument. Here are the pros and cons of considering investing in annuities.

Passive investment: Annuities allow for the owner of the annuity to have almost no involvement in any actual investment. The insurance company invests the funds and provides the professional side.

Safety and security: Annuities are some of the most safe and secure possible places for investing your money. The insurance company is regulated by each state's Department of Insurance and in addition each state provides each annuity owner with an underlying guarantee form the State Guarantee Fund. The limits of the guarantees are set by each state and can vary.

Loss of Control: A downside of investing in an annuity can be losing of actual control over your money. The management of the annuity is placed on the responsibility of the insurance company.

Lifetime Income Option: A solid benefit of investing in an annuity is the option to convert the funds in an annuity to lifetime income. The responsibility for the income falls on the shoulders of the insurance company and not the owner of the annuity. The income cash flow is the responsibility of the insurance company which allows for peace of mind to the annuity investor.

Probate Avoidance: If an annuity has a named beneficiary the proceeds of the annuity at death of the annuitant are paid directly without the need for probate. The funds are received quickly and without delay, fees or expenses.

Are you struggling to generate enough annuity leads for your business? Do you want to Solve The Annuity Lead Problem Forever? Do you want to discover a proven annuity lead generation system that has worked for 1000's of annuity agents all over the world? If yes, then you need to get a copy of Bill Broich's Endless Lead Flow System!

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Bill Broich

Related Articles: annuity leads, annuity lead generation , endless annuity lead flow

A Little-Known Community Spouse Medicaid Compliant Annuity Planning Technique

The legislation regarding annuities contained within the Deficit Reduction Act of 2005 ("DRA") seems to apply only to the "annuitant who has applied for medical assistance."  However, most post-DRA states apply the provisions also to an annuitant that is the spouse of an individual who has applied for medical assistance.

Notwithstanding the above, a handful of post-DRA states do not requires an annuity purchased by a community spouse to be irrevocable, non-assignable, actuarially sound, and provide equal payments.  The provisions pertaining to designating the state Medicaid agency as a remainderman still apply.  This means community spouse can take advantage of balloon-style Medicaid Compliant Annuities in the select states that do not apply DRA in its entirety to spousal annuity purchases.

A balloon-style Medicaid Compliant Annuity is an immediate annuity structured with very small monthly payments, with the exception of the last payment which is very large.  Upon maturity, the final payment is paid to the insured.  Why would a community spouse want to take advantage of a balloon-style Medicaid Compliant Annuity?  In light of the very small monthly payments derived from the balloon-style Medicaid Compliant Annuity, the community spouse may receive a large income diversion from the institutionalized spouse.  Of course, this will vary depending on the community spouse's income level and the applicable monthly maintenance needs allowance.

Meet Clarence and Martha.
After a long struggle with Alzheimer's, Clarence entered a Florida nursing home on January 1, 2012.  Together, he and his wife Martha have a home, standard furniture and personal property, one car, prepaid funeral plans, and $245,000 in non-IRA bank accounts.  Clarence has monthly income from social security and pension of $2,300 while Martha has monthly income from social security of $500.  Clarence's nursing home bill is expected to be $6,200 per month.  Martha would like to immediately qualify Clarence for Florida Medicaid benefits.

The Balloon-Style Medicaid Compliant Annuity.
Of the countable resources, Martha is allowed to keep no more than $113,640 as her community spouse resource allowance, and Clarence is allowed to keep $2,000 as his institutionalized individual resource allowance.  After the protected resources are taken into consideration, the spend-down amount is $129,360.  With Martha being 79-years-of-age she is allowed to purchase a balloon-style Medicaid Compliant Annuity with a period certain of 1194 months.  With an investment amount of $129,360, the balloon-style Medicaid Compliant Annuity will provide income to Martha of $116.32 for 188 months, with the final balloon payment of $128,286.32 occurring in month 119.

Medicaid Eligibility.
If Martha purchases the annuity in February of 2012, the spend-down amount is eliminated and Clarence is immediately eligible for Florida Medicaid benefits.  As a result, in February of 2012 and each month thereafter Clarence's Medicaid co-pay is $40.32.  This amount was determined by reducing Clarence's monthly income of $2,300 by the $2,224.68 that was shifted to Martha, and his $35 monthly personal needs allowance.

Economic Results.
With Clarence and Martha expecting to pay $6,200 per month for Clarence's nursing home care, by immediately qualifying for Medicaid benefits Clarence and Martha will save $6,159.68 in February of 2012, and each month thereafter.

Advantages of the Balloon-Style Medicaid Compliant Annuity Plan.
Clarence obtains immediate Medicaid eligibility and is able to contribute to Martha's income so that she may continue to reside in the community as long as possible.  Had Martha opted to proceed with a level-pay Medicaid Compliant Annuity in lieu of the balloon-style Medicaid Compliant Annuity, Clarence's co-pay would have been $1,066.05, resulting in a monthly savings of $5,133.95.  This is $1,025.73 less per month than the balloon-style Medicaid Compliant Annuity plan.

Disadvantages of the Balloon-Style Medicaid Compliant Annuity Plan.
If Martha predeceases the 119-month period certain of her balloon-style Medicaid Compliant Annuity the Florida Medicaid program will be entitled to be reimbursed for the Medicaid expenses paid on behalf of Clarence.  In such an event, Martha's balloon-style Medicaid Compliant Annuity may leave little or no residual benefits to intended heirs.

Alternate Balloon-Style Medicaid Compliant Annuity Option.
In that the Florida Medicaid program does not have a restrictive definition of "actuarially sound" Martha may want to reduce the period certain of her balloon-style Medicaid Compliant Annuity to ensure that she will outlive the term.  Unlike a level-pay Medicaid Compliant Annuity, decreasing the term of a balloon-style Medicaid Compliant Annuity changes the monthly pay-out on a very miniscule basis - usually only pennies.  Should Martha opt for a 60-month term instead of the previously outlined 119-month term her monthly pay-out would only increase by $0.49.

Interesting Planning Points.

1.    Should Martha decide not to proceed with the aforementioned balloon-style Medicaid Compliant Annuity plan and instead continue to privately pay for Clarence's nursing home care, Clarence and Martha will exhaust their entire spend-down amount in approximately 33 months.
2.   Should Martha's financial needs change (i.e. her health deteriorates and she transfers to an assisted living facility) she may require a greater amount of income than the balloon-style Medicaid Compliant Annuity provides.  At any time during the pay-out period of the balloon-style Medicaid Compliant Annuity, Martha may elect to convert the balloon-style Medicaid Compliant Annuity into a level-pay Medicaid Compliant Annuity; this is a one-time election.
3.   If Martha's balloon-style Medicaid Compliant Annuity is nearing maturity and Martha decides it is not in her best interest to receive the final balloon payment, she may elect to continue/rollover the balloon-style Medicaid Compliant Annuity into another policy, taking her new life expectancy into consideration.
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Dale Krause

Dale M. Krause, J.D., LL.M., has provided Medicaid Compliant Annuities to elder law attorneys, and their clients, throughout the United

9 Questions you Must Ask Before Buying An Annuity

There are many different types of annuities. There are situations that an annuity would be the right decision and there are situations that an annuity would be the wrong decision. Annuities can be very confusing. There are hundreds if not thousands of different annuities with different features and benefits. Before buying any annuity, make sure you get the answers to the following questions.

1. What company is it and what are their ratings?
An annuity is only backed by the quality of the company writing it. Find out the rating of the company and make sure it has a rating that you are comfortable with. Ratings go from AAA down. I suggest you stay with a company that is A rated or better.

2. What is the surrenders charge?
Annuities do not charge sales charges up front. Instead if you take the money out before a certain time you must pay a surrender charge. You must be very clear how much that charge is and for how long. The surrender charge is usually on a sliding scale, with the first year or two the highest percentage, then the rate lowers every year. Annuities that have over a 10% surrender charge and/or a charge that last for more than 10 years is often excessive. Make sure you know these numbers before you buy the annuity.

3. What are the penalty free withdrawal provisions?
Most annuities have a penalty free withdrawal. From my experience, the better companies usually have a 10% yearly penalty free withdrawal provision. That means that you can take up to 10% of your accumulated value (the money in the annuity) without having to pay a surrender fee. I have see onerous annuities that have only a 10% lifetime annuity. Find out what the penalty free withdrawal provision is before you buy the annuity.

4. Are there any other circumstances that would waive the surrender fee?
Some annuities have provisions that allow you to access your money with surrender charges for unemployment or nursing home. Find out what the provisions are in your annuity before the purchase.

5. How will I earn money in the annuity?
This is one of the trickiest parts of an annuity. A fixed annuity is pretty simple. You receive a fixed interest rate for the guaranteed period at which time it will adjust to the new fixed rate.
Equity Index Annuities are tied to the "Index" for examples the S&P 500 and a formula is used to calculate the gains. Make sure you understand the formula. It is really important that you understand how this product works if you plan on buying it. In specific ask about crediting method, participation rates and cap rates.
Variable annuities are linked to a managed portfolio and get credited the same way that any equity base product works similar to mutual funds.

6. Are there any limitations on what I can earn?
This is really very important for Equity Index Annuities that have caps on the amount that you can earn in one year and participation rates. Make sure you understand these before you buy.

7. How does the Death Benefit work?
If you die what happens to the annuity? Do your heirs have to annuitize and take their inheritance as a stream of income or can they receive the cash? If the annuity goes down does the death benefit still pay the higher amount. Find out the death benefit of the annuity.

8. Do I have to annuitize to gain the full benefit of the contract?
When you have passed the surrender period can you get the gains? Some companies force you to take your money as a stream of income. Make sure there are no strings at the end of the surrender charge.

9. Why is this strategy better for me than another one?
With so many annuities out there. Find out why your representative has picked this annuity. There are a lot of good answers. If you see a deer in the headlights look, you might want to continue shopping.

Annuities can be a great addition to a portfolio. They can create fantastic streams of income that a person can never outlive. Just make sure that the annuity is right for you.

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About the Author

Steve Lover

Steve Lover is president of Senior Strategies a firm that helps seniors make better decision with their money. Visit their website www

Great tips to generate annuity leads

There are a few strategies you can use to create basic annuity leads obliging little exertion. Go for these strategies to create annuity leads and significantly expand deals.

1. Referrals.

Referrals are basic annuity drives which are not hard to create. Numerous specialists don't execute referrals as frequently as they ought to or have a tendency to keep down on pushing the referral course. Certainly don't be timid about approaching old customers for referrals. These can be laser focused on leads that you ought to seek after. You'll never know unless you ask. Deals can enormously expand executing referrals as a reliable lead producing strategy. Referral is the very common way to generate live annuity leads for agents.

2. Courses.

I think about going to as a course a positive course to straightforward annuity leads because of the information you will probably acquire in one evening. It's the information, as well as the activity outlook that you leave with. We can have lots of live annuity leads for agents through this . We can  Monday morning you'll be restless to make a move and actualize what you've realized for acquiring leads and producing deals. All from one evening responsibility.

3. Online Programs.

A significantly more straightforward course to take for figuring out how to create leads is downloading an online system which works in showing specialists how to expand leads and deals. Consider it, you don't even need to leave your home. Submit yourself to a couple of evenings at home contemplating a decent online lead era program, then begin executing the strategies and watch your business start to increment. Online projects ought to unquestionably be exploited, because of their comfort or more normal reputation for conveying results (projects vary, make beyond any doubt to pick one composed by a legitimate specialists).   

Annuity lead era is key to profiting all alone. Producing leads be that as it may, does not generally demonstrate simple. There are some mystery to the achievement of producing leads and staying away from the oversights that numerous make.

Those without client base, can utilize strategies, for example, mailings and telephone calls. One spot exceptionally prescribed is the Internet as an extraordinary source in building leads. On the Internet, you have incalculable open doors for methods for arriving at new leads. Also, there are a few administrations that can deal with the contact to discover drives that are of better quality.

When you begin to fabricate the leads, never forget to keep up those leads. Always you will need to fabricate to those leads too, with the goal that you generally have new and new material for prospects. Those new to annuity lead era will probably not have earlier clients that they can work with, so it may make things a little harder.

Exploring and the ownership of expertise are basic when you are attempting to produce leads. Considering this, you need to know your potential prospects. On the off chance that you as of now have a client base, then this ought to be a great deal less demanding, since you can allude to the data that you as of now have keeping in mind the end goal to figure out things, for example, their age and where they live, alone with the wage that they make. On the off chance that you can't get it off that data, then you can likewise take a gander at any more established data that you have which will give you the same sort of data in respect to who will be who the cash to contribute.

You ought to likewise make an arrangement on how you are going to achieve potential customers. Direct mailing are useful for rundown that you might as of now have that have demonstrated to function admirably previously. Also, you could put a commercial in the daily paper. One thing to recollect, technique is key as to the position of your promotion. The publicizing that you do ought to achieve the target showcase that you wish to address.

Bulletins or Magazines that are neighborhood inside a territory that you have had accomplishment with previously, additionally serves to deliver clients. Something else that does not damage, is to work with Attorneys and CPA's to help with developing your client base. Publicizing however is vital when you need to draw clients. So these are the best tips to generate live annuity leads.