Making the decision between choosing an annuity beneficiary and a will can be difficult. Both options have their own advantages and disadvantages, and it can be hard to decide which is the best choice for you.
In this personal finance guide, we will compare both options and look into the benefits and drawbacks of each. We will help you make the decision that is right for you and your family!
Annuity Beneficiary Vs Wil Table of Contents
What is an Annuity Beneficiary?
An annuity beneficiary is a person or entity that you designate to receive the payments from your annuity after your death. The payments can be made in a lump sum, over a period of time, or in installments.
What is a Will?
A will is a document that details how you want your assets to be distributed after you die. It allows you to appoint an executor, who will be responsible for ensuring that your wishes are carried out. You can also use a will to appoint guardians for minor children.
What is The Difference Between an Annuity Beneficiary and a Will?
The main difference between an annuity beneficiary and a will is that an annuity beneficiary is someone who will receive payments from an annuity after the death of the policyholder, while a will is a legal document that outlines how someone’s assets should be distributed after they die.
What Are The Different Types of Annuity Beneficiary?
There are four different types of annuity beneficiaries:
The primary beneficiary is the person who will receive payments from the annuity first.
The contingent beneficiary is the person who will receive payments from the annuity if the primary beneficiary dies before receiving all of the payments.
The tertiary beneficiary is the person who will receive payments from the annuity if both the primary and contingent beneficiaries die before receiving all of the payments.
The estate is the final beneficiary and will receive payments from the annuity if all of the other beneficiaries die before receiving all of the payments.
What Are The Different Types of Will?
There are four different types of will:
A testamentary will is the most common type and is created after you die. It names an executor to carry out your wishes and distribute your assets according to your instructions.
A living will, on the other hand, is a document that you create while you’re still alive. It outlines your wishes for medical treatment and end-of-life care in the event that you become incapacitated.
A pour-over will is used in conjunction with a living trust. It names the trustee of your living trust as the executor of your estate and directs that any assets not currently in the trust be transferred into it upon your death.
Finally, a holographic will is one that’s entirely written in the handwriting of the testator (the person creating the will). It doesn’t need to be witnessed or notarized, but because it can be easily forged, it’s not always given much weight by courts.
What Are The Advantages of an Annuity Beneficiary?
An annuity beneficiary has a few key advantages:
- They have the ability to receive income for life.
- Annuity payouts are not subject to probate, so your beneficiaries can avoid any delays in receiving their inheritance.
- Annuities offer tax deferred growth, which means your beneficiaries can grow their inheritance without having to pay any taxes on the growth.
What Are The Advantages of a Will?
A will has a few key advantages:
- A will gives you complete control over who gets your assets when you die. You can include as many or as few people as you want, and you can specify exactly how much each person should get.
- A will can be changed at any time, so if your circumstances change (e.g. you get married or have children), you can easily update your will to reflect that.
- A will is a legally binding document, so there’s no risk that your assets will be distributed differently than you intended.
What Are The Disadvantages of an Annuity Beneficiary?
There are a few key disadvantages of annuity beneficiary that you should be aware of before making your decision.
Firstly, if you die before the annuity term is up, your beneficiaries will not receive any payments.
Secondly, annuities can be complex financial products and it can be difficult to understand all of the features and benefits. Finally, annuity rates can be volatile and may not keep pace with inflation.
What Are The Disadvantages of a Will?
The disadvantages of a will are that it can be contested, it may not cover all of your assets, and it can be expensive to create.
A will can be contested if someone doesn’t agree with the way you’ve divided up your assets. This can cause delays in distributing your estate and lead to costly legal fees.
A will may not cover all of your assets if you have any that are held jointly with someone else or in a trust. You’ll need to make sure that all of your assets are properly accounted for in your will.
Creating a will can be expensive, especially if you hire an attorney to help you draft it. The cost of a will can range from a few hundred dollars to several thousand, depending on the complexity of your estate.
If you die without a will, your assets will be distributed according to your state’s laws of intestate succession. This means that your assets may not go to the people you intended them to go to.
So, Which One Should You Use?
It really depends on your circumstances. If you have a spouse or children, then you will probably want to use a will so that they can inherit your assets. If you don’t have any dependents, then an annuity might be the best option for you.
What Are Some Alternatives to Using an Annuity Beneficiary or a Will?
Some alternatives to using an annuity beneficiary or a will include:
- setting up a living trust
- designating someone as the owner of your assets upon your death
- creating a power of attorney
- making sure your beneficiaries are up to date on all accounts
What Are Some Tips For Using an Annuity Beneficiary?
Some tips for using an annuity beneficiary include:
- Make sure to name a primary and contingent beneficiary.
- Keep your beneficiaries updated as your life changes.
- Consider using a trust as your beneficiary if you have estate planning needs.
- Be aware of the tax implications of naming a beneficiary.
What Are Some Tips For Using a Will?
Some tips for using a will include:
- Make sure the will is kept in a safe place, such as a lockbox or safety deposit box.
- Be sure to update the will regularly, especially after major life changes like births, deaths, marriages, and divorces.
- Have two witnesses present when signing the will, and make sure they sign it as well.
- Keep a copy of the will in a separate location from the original.