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What is an Annuity?

With an annuity you simply set aside a sum of your money in order to generate periodic income. There are two phases to an annuity. The accumulation phase is when premium payments accumulate interest earnings. The payout phase is when a sum of money is paid out over a desired benefit period. Both the accumulation phase and the payout phase of an annuity are extremely flexible. For example, the accumulation phase may consist of a single premium payment or a series of periodic premium payments. Also, the accumulation period may be as short as five years, or for the entire lifetime of the annuitant.

The interest earned on an annuity is tax-deferred. In other words, you do not pay income tax on earnings until you begin the payout phase.

During the payout phase, either all or a portion of each benefit payment will be taxable. For example, if you select an interest only option, the entire periodic payment is considered interest income and therefore is fully taxable. If you select a lifetime income option for your non-qualified annuity, only a part of each payment is reportable as taxable income.

What Is Survivorshop Life Insurance?

The Economic Recovery Tax Act of 1981 allowed postponement of estate taxes until after the death of both husband and wife. While this provides couples with increased flexibility during their lifetime, in many cases it places a substantial tax burden on the combined estate when the surviving spouse dies. Survivorship life insurance provides a solution by covering two lives with proceeds payable at the second death. Therefore it is perfectly suited to deal with the estate tax problem discussed above.