Certified Annuity Specialists Help Guide Financial Futures

Many finance classes will teach you the basics of annuities, but annuities are actually more intricate and dense then most people think. Learning annuity concepts is an important part of a financial advisor’s overall training. Skills acquired from an accredited annuity school will provide planners with the opportunity to develop and create successful financial estate plans for his or her clients. When it comes time to begin setting up these plans, one must not only prepare for their client’s future, but must also factor in the future of their client’s beneficiaries. Annuity trusts can be set up to supply the beneficiary with a fixed amount of income each year. These beneficiaries can include one single person, a group of people, or an organization.

There are many options for highly affluent individuals when it comes to deciding with whom to leave their funds. One common choice is charitable annuity trusts, which provide a fixed dollar amount of income every year to the trust’s income beneficiary, regardless of trust asset value. When creating a trust document, the client must name his or her income beneficiary and the term of the annuity period. Clients often choose to name themselves the income beneficiary and choose for the annuity period to last their lifetime. Additionally, he or she must also state the exact dollar amount of annual income the life beneficiary must receive throughout this period. Once the annual dollar amount has been established and the trust is operational, the dollar amount cannot be adjusted. Payments from an annuity trust remain the same, even if there is significant inflation or trust assets significantly increase in value.

Theoretically, the payments can be as high as 50% of the value of the trust. However, law requires that the charity must actually receive at least 10% of the original gift at the end of the term. If the payment is set too high, it would require spending principal, possibly using up much of the gift before the payment term is over. This clearly defeats the intended aspiration to make a gift to the charity. These annuity trusts are advantageous for many in the sense that if the trust somehow has lower-than-expected income. For example, during a period when interest rates are low, the income beneficiary still receives the same annual income. The trustee must make use of the trust principal, if necessary, in order to make payments. This cannot be done with other types of charitable remainder trusts.

In comparison to annuity trusts, charitable gift annuities are also very popular, especially with educational institutions. They are very simple trusts; the client chooses and contacts a selected charity and informs them of his or her intention to make a donation in the form of a charitable gift annuity. The charity staff will provide the client with the information needed and forms to fill out. A contract is signed between the charity and the client, with the assistance of the financial planner, which sets out the terms of the donation, including the amount and duration of the payments made to the chosen income beneficiaries.

An annuity school education teaches financial planners how to successfully handle complex annuity trusts and plans. More than ever before, financial advisors can benefit by having a deep understanding of annuities and how they can be advantageous to their client’s portfolios. Through obtaining an annuity certificate, financial planners will further understand the latest annuity concepts and options.

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