Estate Planning: Immediate Annuities

There are three common scenarios that can arise in an estate plan in which an annuity can prove useful:
1. Providing for a longtime household employee.
2. Making a gift or bequest to an individual privately, when there are concerns about his or her ability to handle funds.
3. Managing the investment of a trust where the surviving spouse is not the parent of the remainder beneficiaries of the trust.

In these scenarios, a single-premium immediate annuity (SPIA) — an annuity contract where payments must begin within one year — may be appropriate. (A deferred annuity, where funds accumulate until the contract is converted to an income stream, can be a useful tool in some estate planning situations, but not in situations that require payments to begin shortly after the annuity purchase.)

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