From Kiplinger · · 1m 40s
Leave Monthly Paycheck to Kids for Life with Annuities
Annuities guarantee lifelong monthly payments to heirs without tax penalties or early withdrawal fees.
In brief
Annuities guarantee lifelong monthly payments to heirs without tax penalties or early withdrawal fees. A lifetime deferred income annuity provides tax-efficient, guaranteed monthly payments to children or grandchildren for life starting at age 25. Originally reported by Kiplinger.
Annuities for Heir Paychecks
Annuities provide a simple way to leave guaranteed monthly payments to children or grandchildren for life without legal fees.
Tax Benefits for Heirs
Heirs receive tax-free principal returns while taxable interest is paid over the payment term without IRS penalties.
Lifetime Payments Start at Age 25
Payments begin when the heir reaches age 25 and continue for their entire life, avoiding early withdrawal penalties.
Example Payment Amount
A $100,000 deposit at age 10 yields $1,229.71 monthly payments by age 25 with $1,083.37 taxable.
Taxable vs. Tax-Free Returns
The annuity returns $785,391 taxable interest plus $100,000 principal over the payment term if the heir lives to age 85.
No Cash Surrender Value
Heirs cannot access the full amount immediately, ensuring the gift lasts for their entire life without depletion.
Inflation Protection Option
Adding an inflation-protection rider increases payments over time while reducing initial amounts.
Guaranteed Annuities with Cash Value
Three types of deferred annuities offer cash value for education or home purchases while providing income options.
Tax Efficiency for Heirs
Heirs listed as beneficiaries avoid 10% IRS early withdrawal penalties and pay standard income tax on untaxed gains.
UTMA Account for Minors
To name a minor as a beneficiary, specify a Uniform Transfers to Minors Act account with a custodian to manage funds until adulthood.
The short version
A lifetime deferred income annuity provides tax-efficient, guaranteed monthly payments to children or grandchildren for life starting at age 25.
