Investors often put a portion of their money into Single Premium Immediate Annuities – financial products that offer a simple way to add guaranteed growth to portfolios. These investments, known as SPIAs, come with minimum risk and provide a stream of payments that can last through retirement.
The actual investment involves an insurance company selling a SPIA to a buyer and then keeping that investment safe through the duration of the payout.
SPIAs carry one advantage over other annuities because they enjoy more flexibility. Like other annuities, they can be passed down in the event of a death. But they also offer the initial investor – or the inheritor – the ability to sell the payments for money now.
Two real-world examples of how this was done:
- A minor who inherits a SPIA from parents after they passed away is ready to turn 18 and needs money for school
- An adult whose inherits a SPIA and has no use for long-term payments but needs money now to put money down on a house or needs to pay off medical debt.
Inheriting as a Minor
At first, when minors inherit annuities, they are unable to access this money. An adult, who may be specified in the contract, oversees the funds. For the most part, this money cannot be touched until the minor reaches the age of 18.
Other annuity products can end up with excess funds going to the insurance company if the owner dies while payments are still owed, but SPIAs can be structured to leave leftover payments to beneficiaries. This allows owners to preserve wealth for heirs and avoid a lengthy probate process (which refers to the legal procedure for dividing up a will).
Once beneficiaries reach the age of majority, they will have options for how they want to receive their inheritance. With a few of these options, they will be able to get a lump sum of cash right away.
Adults Inheriting Annuities
After you inherit a single-premium annuity, you have some decisions to make. As the new owner, you typically have three main options for taking payments. You can take a lump sum, five equal payments, or a stream of payments for the rest of your life.
Spouses inheriting annuities may follow different procedures, such as following the schedule the previous owner set up or having the annuity adjusted to their own life expectancy.
Some beneficiaries choose to get cash right away, rather than waiting for scheduled payments. Others decide not to opt for the lump sum in an effort to delay income tax payments and also make sure they don’t spend the entire inheritance immediately.
Cashing Out Without a Court Hearing
If waiting years for payments is a plan that isn’t meeting your needs, consider selling SPIA payments. It’s an easy process that quickly gets capital in your hands.
When it comes to selling other types of annuities, like those used for personal injury cases, people must go to court and get permission from a judge to sell their payments. However, when you inherit a SPIA annuity and are at least 18 years old, you can sell these payments without going through the hassle of a court visit.
In fact, selling SPIA payments is significantly easier than selling other annuity products because:
- It can be completed within 48 hours.
- There’s no need to schedule a court hearing.
- There’s no need to wait for a judge’s approval.
Without a court process and within a matter of days, the process can be completed and you will get a hefty check for your SPIA payments.
Once you have money in the bank, you will be ready to handle college tuition, eliminate debt, buy a new car or pay your mortgage, monthly credit card bills and loan payments. Instead of falling behind and paying late fees and increased interest rates, get back in control today.
Facing Financial Strain
Have you encountered a serious crisis or shift in priorities that strains your budget and requires you to spend more than your regular income allows? Annuity beneficiaries waiting for payments are uniquely equipped to handle these types of situations.
When you first inherited the annuity, choosing a stream of payments of over time made the most sense. You knew your spending habits and structured payments accordingly. However, when circumstances change, receiving an inheritance piece by piece doesn’t always make sense.
By selling inherited payments you can address a variety of needs, from putting together a down payment for a car or home to paying for college tuition.
5 Cited Research Articles
- D'Amato, V. (2011, April 16). Know your options if inheriting annuities. Redding. Retrieved from http://www.redding.com/business/know-youroptions-ifinheritingannuities
- Hyers & Associates Insurance. (2014 July 1). Annuity proceeds: beneficiary designation, probate and passing. Retrieved from http://www.ohioinsureplan.com/annuity-proceeds-beneficiary-designation-probate-and-passing/
- Merkel, S. (2009). What are the distribution options for an inherited annuity? Retrieved from http://www.investopedia.com/ask/answers/09/inherited-annuity-distribution.asp
- Cross, N. (2014). Do I pay taxes on all of an inherited annuity or just the gain? Retrieved from http://finance.zacks.com/pay-taxes-inherited-annuity-just-gain-6965.html
- O'Conner, J. (2014, September 23). Will inheriting an annuity have tax consequences? Fox Business. Retrieved from http://www.foxbusiness.com/personal-finance/2014/09/23/will-inheriting-annuity-have-tax-consequences/