Of course, you can pamper your kids with gifts or leave a legacy, but there is another way to provide grandchildren with a steady income, and it is an annuity purchase. One life-time gift is a deferred income annuity. This policy involves deferred payments.
For example, your grandson is 10 years old. You buy a $100 thousand insurance policy and assign payments upon the attainment of the age of 25 until the end of life. In this case, an insurer guarantees a monthly payment of $481.68 to the youngest family member, of which only $335.73 will be taxed on income. In case your grandson lives to the age of 85, he will receive a total of $346,809.60.
Pros and Cons
It is very pleasant to realize that even after your passing the bearers of the family name will have your support. However, you should weigh up all the pros and cons before buying such a policy. An insurance agreement implies you will never need $100 thousand. By the way, some people buy policies for less money ($10 thousand), but still provide future generations with stable income.
Depending on the laws of your state, when a person buys an annuity, he has 10 to 30 days to change his mind and refuse an insurance policy.
The undoubted advantage of such a product is inheritance. With your grandson early passing, your great-grandchildren will receive your money.
Another advantage of a deferred income annuity is tax exemption. US government signifies this instrument as a repayment of debt and interest on it. Thus, the interest is a subject to income tax but the debt is not.
This policy purchase is probably not suitable for people with relatively large income.
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