Annuities Are For A Lifetime
Is a life annuity right for you and your family?
Decide Why You Want A Life Annuity
Annuities for life take on many forms so your first job is to decide what you want a life annuity to do for you. The usual form of life annuity is one where a person takes a life annuity on herself or jointly with a partner. This life annuity, which will remain in force until the death of the second annuitant, can be added a guarantee period of say, 10 years. Should death occur to the annuitant or annuitants before 10 years are up there would be a balance owing to the beneficiaries.
Registered and Non-Registered Funds
In Canada for registered plans there would be a present day valuation made of those payments. This amount would then be taxed and the balance distributed to the heirs. In the case of non registered funds, the payments would continue for the balance of the guaranteed period.
So annuities for life means just that. You don't need to have a guaranteed period as the life annuity payment periods continue for all your life and if you need the maximum income, that's the way to go.
Do You Need A Guarantee Period?
Life annuities are a great way to use your age as a weapon against low interest rates and high taxation rates, especially for non registered capital. Capital in RRSP's, RRIF's and the like is not taxed while invested and growing and will be used for an annuity for life. But the proceeds are taxable, whereas the payments from non registered plans are only partially taxable. And that is because each payment contains a partial return of capital with which the annuity for life was purchased.