A lot of laws have been passed recently that place more responsibility on agents who sell annuities.
Agents are now required to complete suitability, replacement, and disclosure forms that were unheard of just a short while ago. In many states, agents who sell annuities are also required to complete Annuity Specific Continuing Education.
At first blush, I was upset about having to complete annuity training–this, after having over 34 years experience selling annuities and being "grandfathered" from state-required CE.
But the more I think about it, the more I believe the additional training is sorely needed and a good thing. Some agents who have been in the business 20+ years have compounded their knowledge to match their tenure. But many more only have one year's worth of experience 20 times over–i.e., they're still at rookie level after 20 years.
Most agents will benefit from training in the annuity basics such as living benefits, beneficiary death benefits, taxation, protection under guaranty fund and bankruptcy laws, comparison of different types of deferred contracts and annuitization options, etc.
Agents call me every day with annuity questions, and I try to answer as simply and briefly as possible. Surprisingly, one of the most common topics concerns death proceeds. Here are typical examples.
Question: "One of my deferred annuity clients just died and his wife is the beneficiary. What options does she have?"
Answer: She has 3 basic options: 1) cash out; 2) elect to have the funds paid out over a period of time; or 3) switch out, take his name off the contract, put her name on and pick up the contract where he left off. (The last option is technically called "spousal continuation.") Additionally, she can select a combination of the above options.
Question: "If a person, other than the spouse, is the beneficiary, what options does this person have?"
Answer: They also have 3 basic options: 1) cash out; 2) elect to have the funds paid out over a period of time (but this option must be selected within 60 days of death); or 3) deferred cash out, where the beneficiary may defer payment for up to 5 years from date of death.
Question: "What options are available if an estate or a trust is the beneficiary?"
Answer: Only one option, cash out.
As stated above, those are just quick, simple answers to questions. There is a lot more information that needs to be learned before beneficiaries can make wise decisions. For example:
