How to leave a lifetime of income to a beneficiary?
In this episode, Chris Berry answers the question, How to leave a lifetime of income to a beneficiary upon death?
Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.
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Episode Transcript
Income Stream for Life
I want to create a lifetime of income for a beneficiary upon death how would I go about doing that.
Welcome to Berry’s Bites please join our host attorney and financial advisor Chris Berry there are different ways to do it again getting back to the kind of through the legal channels, what we would probably want to do is create trust and instead of upon death. Just going outright to that individual that pillowcase of money approach instead we would hold it in trust for their benefit, call this a separate share trust or legacy inheritance trust.
And so this trust for the beneficiary we could build certain rules around it so we could say that maybe just the income comes out of this and the principal remains. We could say you know, what maybe four percent per year comes out of this or I’ve had families say 10 per year for 10 years. The idea is that it’s basically liquidated over a period of time but if we’re looking at creating a lifetime of income, then we can just direct the trustee to do one of these things and maybe direct it four percent a year, comes out now taking it one step further, what we also could do is look at upon death what we could do is get what’s called a single premium immediate annuity based on the beneficiary’s life this is almost like kind of social security you pay money in for your lifetime and then at a certain point, you flip a switch and now it becomes annuitized. And so, we could do a single premium immediate annuity based on the insurance company and the age of the individual the insurance company will guarantee a certain amount of income per year or per month for life obviously the younger the individual the lower the amounts the older the individual the higher the amount would be.
So we could do it from a legal perspective and just leave it up to the trustee to decide how to invest to get to that point or if you really truly want a guaranteed lifetime of income then you would look at a single premium immediate annuity which is basically similar to say social security or pension. It’s just taking a lump sum of cash and turning it into an income stream for life.