Allow us use a great example here to start off with as we breach the topic an annuity
death benefits and how or why they can and do apply to many different people from all walks of life. Say – and this is for the purpose of an example here – that you are a
married couple and you are the wife. Your husband has worked at a certain job for a few decades and retired. The untimely passing of him, or his death, leaves you wondering
what is going to happen to that double vested pension he earned, and what your financial future is really going to look like.
Herein is where the topic of an annuity death benefit really comes into the picture. Such retirement funds are generally investments that are made by small amounts of money being set aside from each paycheck that is earned and
then invested by a company that managed annuities. However, when the payee, in this case the widow of the dead husband, is now the recipient, there can some options that you really want to consider, and ones that will more than likely be offered to you.
Your Tax Liability is of Concern
In a lot of cases when a person who is receiving an annuity passes away, there are some options, or at least for the most part, that are presented to the significant other or immediate willed family member of the deceased. Many times companies will offer you lump sum payments to cash out the fund early. However, it is greatly advised that you speak to a financial annuity professional regarding these matters, because taking the lump sum could net you a fairly hefty tax bill and some other associated fees, depending upon what plan the person had for their retirement was.
In some cases you can keep the payments coming in as scheduled, or you can opt to change the plan. Before doing anything, do yourself a favor and talk to the pros, as they will be the ones that can really tell you what your true options are and which way is perhaps the best way for you to go, and the way that will most benefit you. If you take a lump sum, you could be placed in a really high tax bracket and find yourself paying a huge chunk of change to Uncle Sam.
To talk to the pros before making your move, as a wise approach should be the only clear cut option here.