Assuming, for example, a client elects a life contingent annuity
that begins distributions at age 70, and that the DIA (together with Social Security payments) will fund essential needs, then the chief outstanding issue is determining an appropriate withdrawal rate on the balance of retirement assets to ensure that basic living expenses are covered until the DIA kicks in.
Clarification for Authority to Issue Contingent Annuity
If you don't think inflation will be a factor, I priced a straight life contingent annuity
for a 65-year-old and the premium came in around $55,000 to receive $4,000 a year.
This is a life contingent annuity
in which the company is instructed that, in the event of the annuitant's death prior to the end of the minimum guarantee period selected, the company is to make the payments to a named beneficiary for the remainder of the guarantee period.
According to Example 5, if any amount of the annuity could be payable to a grantor's estate, the value of that contingent annuity
interest had to reduce the amount of the grantor's retained trust value.
The AAA analysis by its Contingent Annuity
Work Group (CAWG) sought to clarify this issue by noting that financial guaranty insurance products, Like bond insurance, protect against specific types of financial tosses and contain no life contingent element.
To check the viability of the income offered, the purchaser could compare the income offered by the impaired life annuity to the income available from a fixed period, non-life contingent annuity
, using the number of years of the expected life of the annuitant for the fixed period.
Further, the court distinguished this case from Walton because the contingent annuity
was payable to the grantor's estate when the grantor died.
The power to revoke retained by the grantor should prevent the spousal contingent annuity
from being a completed gift for gift tax purposes.