Would/Could a SPIA work here?

[T in CA]

Would a SPIA potentially work in a situation where wealthy parents want to fund a monthly income for their adult child until they die (when child will inherit a very large sum and won't need the income)?

- they want to provide x amount monthly (don't want to personally write checks)
- for as long as necessary (until the 2nd death)
- parents are both around 80
- "child" is a little shy of 50

Can someone under 50 receive income on an annuity owned by someone else (parents) and can you "back in" to a funding amount by assuming the number of years of income (like 10 or 15)?

Thanks for any ideas/advice.

 

[fed up]

Be very careful. The SPIA goes away with major costs upon death. There is a large sum to be inherited so this might not be an issue in this case, however. Let's say that you pick a period certain of 15 years for the SPIA and dump enough in it to generate a significant amount each month. Mom and Dad don't make it 10 years during which the SPIA has been paying out a living wage. When the beneficiary (the son) decides what he wants to do with the balance he either continues to receive the monthly check or take a lump sum which is no where near the balance.
I recently had a situation with my Mom. She had money laddered in CD's and cashed them out and was receiving .025% or some stupid amount on her account. I contacted VOYA about a SPIA so that she could receive a monthly amount if she needed it, she could reinvest the amount if she wanted to, and receive a much higher return than the bank. VOYA assured me that the balance would be paid to the heirs with no surrender charges, no penalties. My other concern was Mom leaving her check book somewhere and losing the balance in her acct. She deposited 100K with VOYA on a 5 year certain and was to receive 1600 per month. She made it 2 months into the contract, fell, got pnuemonia, and died. ?VOYA was sending me, as executor almost 20% less than the balance, citing a paragraph on page 22 of the contract but each of the CSR's I spoke with said there was no penalty. It took a letter to the Virginia Commissioner to get VOYA to honor their own recorded phone calls where they assured me of no penalty.
Sorry for the long winded reply but be careful with the SPIA

 

[Allen Trent]

Would a SPIA potentially work in a situation where wealthy parents want to fund a monthly income for their adult child until they die (when child will inherit a very large sum and won't need the income)?

- they want to provide x amount monthly (don't want to personally write checks)
- for as long as necessary (until the 2nd death)
- parents are both around 80
- "child" is a little shy of 50

Can someone under 50 receive income on an annuity owned by someone else (parents) and can you "back in" to a funding amount by assuming the number of years of income (like 10 or 15)?

Thanks for any ideas/advice.

Yes, it can likely be done as you have mentioned, but current interest rate environment might not make any mathematical sense to do so.

You could get quotes for a joint life SPIA based on both parents dob with them as the owners & annuitants. They could have their son as the payee to receive the checks. Joint life would assure the check would continue until the 2nd one passed away. this would provide the largest check for the least deposited. if you are concerned that they could die too soon & would get back less than lump sum deposited, you could get a quote for the joint life with installment refund. while this would mean a larger deposit needed to generate the same size check, it would at least insure the original deposit would be paid at worst case as the checks would be guaranteed to pay at a minimum until the original installment lump sum was paid out or longer if parents lived longer.

in your quote request, you can ask for a solve to generate either a monthly check amount desired & what the lump sum deposit would need to be or how much a specific lump sum would generate monthly. again, I think you may be shocked at how much is needed to be deposited to generate the check.

you may want to instead see if any of the Equity Indexed Annuity carriers out there with a Lifetime income rider might be better. Lets say it offered a 5% annual income guaranteed (no idea if this is currently the rider % in the marketplace). this way, the son as the payee of the checks would be guaranteed to get the 5% check per year based on the original deposit, even if the account value eventually went to zero. If the parents were the annuitants on the policy, it might even have a higher rider payout because of their older age. if the son was listed as the annuitant, maybe it would be smaller.

Also, you will want to ask any carrier on either a SPIA or a EIA/Variable annuity who will receive the annual 1099 tax notice for the reportable income--the parents as owners or the son as the payee receiving the checks.

2nd to Die Life policy might be an option too that could allow for some of the current assets to be spent down for income to the son & when the 2nd one dies, the assets spent down are replaced by the 2nd to die tax free death benefit payout