You can accomplish your goal of continuing child support payments
after your death via numerous investment vehicles, not just through
insurance. In fact, I'd urge you to consider other options, because
generally, annuitized income from an insurer is not a terrific return
on capital.
First and foremost, I'd urge you speak to your attorney in connection
with your life insurance planning. It sounds like your situation is
not cut and dry and you may benefit from having a life insurance trust
established, to protect life insurance proceeds upon your passing. A
simple life insurance trust would cost you approximately $750-$1500
depending on complexity.
Second, in what amount and with what frequency are your support payments?
I'll assume two scenarios.
The first scenario is that you have no savings and simply fund a
term-life insurance policy that carries a lump-sum death benefit. Upon
your passing, the proceeds would pay out to a beneficiary. If you
establish a life insurance trust, the insurance death benefit would
pay out to the trust and then the trust could distribute the proceeds
as it sees fit. In essence, the trustee could pay out the child
support payments directly from the trust in whatever amount or
frequency you set forth. In this way, the trust retains control of the
assets in your best interest, not the insurance company. Appropriate
investments might include tax-exempt municipal bonds, CDs, or some
other type of interest-bearing investment that could generate cash
flow required to pay your monthly support payments.
The second scenario assumes that you have some sort of substantial
savings today and that you want to plan for your retirement AND
protect your children. Assuming you could invest $100,000 today, you
could buy a variable annuity that provides an enhanced death benefit.
In this example, you would look for a variable annuity that offers an
enhanced death benefit that is calculated as the greater of total
premiums adjusted for withdrawals grown at 6% annually; or, greatest
anniversary value. Essentially, a variable annuity offering this type
of guarantee would offer your heirs a "safety net" in the form of a
death benefit that regardless of market performance guarantees them 6%
growth--even if you experience negative returns throughout the life of
the investment. So, let's assume we invest $100,000 in this type of
variable annuity and we lose 3% annually until you pass away, 10 years
later. Your $100,000 would be worth $76,023.11. What an awful
investment! However, your heirs would be guaranteed 6% growth on the
$100,000, which after 10 years is $168,947.90. The insurer would pay
the greater amount to your heirs. You can restrict how that money is
paid out (i.e., you can arrange to make payments monthly in set
amounts) and leave that money invested or you can annuitize it for
your heirs and make this determination while you are alive.
Essentially, variable annuities often have "predetermined beneficiary
designations" that operate as a "poor man's trust."
Both of these examples give you 100% control over the money rather
than giving it to the insurer. Both examples can also offer you better
advantages over simple index annuities that often limit the upside.
Hope this is helpful. |
