Again, an annuity with this type of guarantee will produce smaller checks than a straight life annuity
because the insurer has more risk.
If a decedent was receiving a straight life annuity
, there is no property interest remaining at the decedent's death to be included in the decedent's gross estate.
While a straight life annuity
will result in the highest total annual payments to the annuitant, it is rarely the best choice, because the risk of losing one's investment before recovering the principal is too much of a psychological barrier during the purchase process.
The Contracts are available in several different forms, including a straight life annuity
, a life annuity with a guarantee period, and a life annuity with various types of refund features.
Choosing a period-certain guarantee liquidity option results in a lower payment compared to a straight life annuity
. Aronoff said that while inflation can drive down the value of a fixed income, not taking advantage of mortality credits and risk pooling means prospects don't receive income they would otherwise get.
The computation above is for a straight life annuity
(without a refund or period-certain guarantee).
If payments were made under a straight life annuity
, payments cease upon the annuity holder's death; there is no remaining property interest, nothing is passed to survivors, and nothing is included in the annuity holder's estate.
However, mandatory retirement at age 65 is specifically permitted for an individual who has been in a "bona fide executive or high policy making position" for at least two years before retirement and who is entitled to a minimum fully vested pension of $44,000 annually calculated as a straight life annuity
Where payments are for life, a straight life annuity
is the least expensive type of annuity.
As one would expect, the overall valuation of the annuity is lower for all households for the simple reason that a life-plus-20-year period-certain product has lower payouts than a straight life annuity
. If one does not value a bequest motive, then the use of a period-certain payout operates like a load factor, (6) reducing the payouts with no corresponding utility benefit.
Typically, the acquisition of a straight life annuity
covering the annuitant's life will not give rise to an estate inclusion.
If the decedent was receiving a straight life annuity
, there is no property interest remaining at his death to be included in his gross estate.