Annuity Contract Ownership

advertisement
Annuity Contract
Ownership –
Annuitant Driven
Contract
Brought to you by the Nationwide® Advanced Sales Team
FOR BROKER/DEALER USE ONLY—
NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
Some things you need to
know
•
•
•
CIRCULAR 230 DISCLOSURE: To comply with US Treasury
Department regulations, we inform you that unless otherwise
expressly indicated, any tax advice as contained in this
communication (including any attachments) is not intended or
written to be used, and cannot be used, by any person other than
nationwide and its affiliates, for the purpose of (i) avoiding penalties
that may be imposed under the Internal Revenue Code or any other
applicable tax law, or (ii) promoting, marketing or recommending to
another party any transaction, arrangement or other matter.
Federal tax laws are complex and subject to change. Neither the
company nor its representatives give legal or tax advice. Please
talk with your attorney or tax advisor for answers to your specific
questions.
When evaluating the purchase of a variable annuity, your clients
should be aware that variable annuities are long-term investment
vehicles designed for retirement purposes and will fluctuate in
value; annuities have limitations; and investing involves market risk,
including possible loss of principal.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
2
Some things you need to
know
• All guarantees and protections are subject
to the claims-paying ability of Nationwide
Life Insurance Company, and do not apply
to variable underlying investment options.
• Before investing, please encourage your
clients to carefully consider the fund’s
investment objectives, risks, charges
and expenses, which can be found within
the product prospectus and underlying
fund prospectuses. Both the product
prospectus and underlying fund
prospectuses can be obtained by writing
to Nationwide Life Insurance Company,
P.O. Box 182021, Columbus, OH 43218.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
3
Some things you need to
know
• Life insurance and annuities are
issued by Nationwide Life Insurance
Company or Nationwide Life and
Annuity Company, Columbus, Ohio,
member of Nationwide Financial®.
The general distributor for variable
insurance products is Nationwide
Investment Services Corporation,
member FINRA.
• © 2011, Nationwide Financial Services,
Inc. All rights reserved.
• Not a deposit • Not FDIC or NCUSIF insured
• Not guaranteed by the institution
• Not insured by any federal government agency • May lose value
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
4
Agenda
Part I
• What is an annuity contract
• Parties to an annuity contract and their roles
• Two phases and types of annuity contracts
• Death benefits: standard and enhanced
• Required death distributions
Part 2
• Common annuity contract structures
Questions
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
5
The Story of Mom, Glen
and Sally
Mom had a good son named Glen and
a bad daughter named Sally.
Unfortunately, most of her life, mom did
not know Sally was bad. She trusted
Sally with her financial affairs, including
naming Sally as executrix of her estate.
Sally lived on the West Coast and did
not attend to mom when she became
ill. As always, Glen took care of mom.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
6
Annuity purchased for
$300,000
•Owner - Mom
•Annuitant - Son
•Beneficiary - Son
•No joint owner or contingent
owner was named
•Contract is annuitant driven
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
7
Results at Mom’s Death
• Mom died
• Annuity did not pay a death benefit
• Under the contract, proceeds pay to
the joint owner if named or
contingent owner if named
• No joint owner or contingent owner
was named
• As a default the contract distribution
was payable to mom’s estate
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
8
Summary of Outcome
• Sally, the executrix of the estate,
received the distribution.
• Sally and Glen were equal
beneficiaries of the estate.
• Mom’s intent was not
accomplished.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
9
Part 1
Annuity (commercial annuity):
A contract between an individual
and an insurance company in
which the company agrees to
make a series of periodic
payments to an individual in
exchange for a premium or series
of premiums.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
10
Types of Annuities
•
•
•
•
Deferred Variable
Deferred Fixed
Immediate Variable
Immediate Fixed
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
11
Two Phases of a Deferred
Annuity
• Asset accumulation phase Premiums paid into the contract
have the potential to grow on a
tax-deferred basis.
• Payout phase - Income
payments are usually disbursed
on a regular basis from the
contract.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
12
Two Deferred Annuity
Contract Types
• Owner-driven contract Owner’s death initiates death
benefit payment to beneficiary
• Annuitant-driven contract Annuitant’s death initiates
death benefit payment to
beneficiary
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
13
Annuitant Driven
Characteristics
•
Allows the annuitant to receive periodic payments for
the rest of his or her life
•
Offers a death benefit when the annuitant dies
•
Only contract value, subject to CDSC, is distributed
when the non-annuitant dies
•
Tax-deferral - the investor pays no taxes on the
income and potential investment gains from the
annuity until the funds are withdrawn
•
Some annuitant driven contracts may offer death
benefit protection for non-owning spouses
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
14
Parties to an Annuity
Contract and their Roles
Insurance Company
Owner
• Joint Owner
• Contingent Owner
Annuitant
• Contingent Annuitant
• Co-Annuitant
Beneficiary
• Primary Beneficiary
• Contingent Beneficiary
• Successor Beneficiary
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
15
Owner
One who possesses all rights under the contract
including the right to:
•
•
•
•
•
•
•
•
Name and change the annuitant
Choose and change the annuity starting date
Select (and change before the annuity starting
date) a payout election
Name and change the beneficiary
Request and receive proceeds of a partial or
full surrender
Allocate funds among different sub-accounts
Control status of a systematic withdrawal
Change contract ownership to other parties
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
16
Joint Owner
• Joint owners each possess an
undivided interest in the entire
contract
• Joint owners may only be named
on non-qualified contracts
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
17
Contingent Owner
• A contingent owner is entitled to
certain benefits under the
contract if a contract owner who
is not the annuitant dies before
the annuity starting date, and
there is no surviving joint owner
• A contingent owner may only be
named on non-qualified contracts
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
18
Annuitant
• The “measuring life” for providing
income benefits under the annuity
contract
• Age determines benefits payable
under an annuity
• Attainment of a given age determines
annuity starting date
• Generally, the annuitant is the person
who receives payments during the
payout phase
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
19
Contingent Annuitant
• The individual who becomes the
annuitant if the owner and
annuitant are two different people
and the annuitant dies before the
annuity starting date
• In this situation, the contingent
annuitant becomes the annuitant
and no death benefit is paid
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
20
Co-Annuitant
• The individual (generally must be
a spouse) whose death, if prior to
the annuitization date, pays a
death benefit to the primary
beneficiary.
• May only be available for an
additional expense or associated
with an enhanced death benefit
option which includes an
additional expense.
• Usually only available on
annuitant driven contracts.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
21
Primary Beneficiary
The individual or entity that
receives the death benefit if the
annuitant dies before the
annuitization date and there is no
joint owner
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
22
Contingent Beneficiary
The individual or entity that
receives the death benefit if the
annuitant dies before the
annuitization date and there is no
joint owner or primary beneficiary
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
23
Successor Beneficiary
The successor beneficiary will
receive any remaining
payments in the event the
designated beneficiary dies
prior to complete payout
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
24
Primary Beneficiary and
Contingent Beneficiary Rights
and Roles
• A contract owner may name more
than one beneficiary.
• Each beneficiary will share the death
benefit equally, unless specified
otherwise.
• Beneficiaries are usually paid by
class, meaning that no contingent
beneficiaries will collect until all of the
primary beneficiaries have died
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
25
Death Benefit:
Standard vs. Enhanced
Standard Death Benefits:
(before annuity start date)
• Total premiums paid to the
contract less any
withdrawals; or
• The current value of the
annuity contract
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
26
Death Benefit:
Standard vs. Enhanced
Enhanced Death Benefit Options
• Accumulated contract values are “locked-in” on set
contract anniversaries such as any contract
anniversary or the most recent five year contract
anniversary prior to the annuitant’s 86th birthday
• Rate of return is guaranteed on each purchase
payment accumulated at a specific interest rate to
protect against market downturns
• Please remember that this is subject to state
availability and terms and conditions may vary by
product
• All guarantees are based on the claims-paying
ability of the issuing insurance company
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
27
Required Distributions
Death of Owner Occurs Before the Annuity
Start Date
The entire contract value must be:
1. Distributed within the five (5) years of the
date of the owner’s death;
2. Distributed over the beneficiary’s life
expectancy – distributions must begin no
later than one year following the owner’s
death. Term period for these two options
must be based on the beneficiary’s life
expectancy or a period not extending
beyond his or her life expectancy; or
3. Annuitized – same distribution terms as #2
apply
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
28
Spousal Exception
If the surviving spouse becomes
the contract owner upon the
death of the owner, he/she may
elect to continue as the contract
owner.
No distributions are required.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
29
Required Distribution
Death of Owner Occurs after the
Annuity Start Date
Any remaining periodic income
payments must be made at least as
rapidly as prior to the death of the
owner.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
30
Part 2 – Common Annuity
Contract Structures
Upon the death of the owner
does his/her surviving spouse
become the owner?
Under federal law, the death of
the owner generally requires
distributions to commence or
continue.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
31
Common Annuity
Contract Structures
Father wants to maintain control of
the contract and have the death
benefit payable to his child upon
the Father’s death.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
32
Example
John is the owner and
annuitant
His son Sam is the
beneficiary
Upon John’s death, Sam
receives the death benefit
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
33
Common Annuity
Contract Structures
Wife wants to maintain control of the contract
and have the death benefit payable to a child
(or other third party) upon wife’s death
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
34
Example
Mary is the owner and annuitant
Her daughter Jill is the beneficiary
Upon Mary’s death, her daughter
Jill receives the death benefit
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
35
Common Annuity Contract
Structures
Husband and wife want a child (or
other third party) to receive the death
benefit only after both have died
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
36
Example
John would be the owner and annuitant. Mary (his
wife) would be the contingent owner and
contingent annuitant. Jane would be the primary
beneficiary.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
37
Common Annuity Contract
Structures
Husband and wife want to
maintain joint control of the
contract until both their deaths
with the death benefit payable to
a child (or other third party)
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
38
Example
Joe and Sue would be the joint owners. Joe
would be the annuitant. Sue would be the
primary beneficiary, and Jane would be the
contingent beneficiary.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
39
Common Annuity Contract
Structures
Husband and wife want to name a revocable
trust as owner and have the death benefit
payable to the trust upon husband’s death.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
40
Example
The trust would be the owner, David would
be the annuitant, and the trust would be
named as beneficiary.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
41
Common Annuity Contract
Structures
Husband and wife want to jointly own
the contract and have a death benefit
paid upon the death of either spouse.
Additionally, husband and wife want
the surviving spouse to continue the
contract upon the death of either
spouse.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
42
Example
Paul would be the owner and
annuitant. Jodi would be the joint
owner and co-annuitant. Both Paul
and Jodi would be the primary
beneficiaries.
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
43
Revisiting Mom, Glen
and Sally
What could the mother
have done to make this
situation come out the
way she had intended?
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
44
Questions?
Independent Dealer:
Financial Institutions:
Wirehouse/Regionals:
Nationwide Agents:
Nationwide Financial
Network:
1-800-321-6064
1-800-893-5399
1-800-720-1511
1-888-333-4202
1-877-223-0795
FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC
NFM-1075AO.7 (04/11)
45
Download
Related flashcards

Banking

21 cards

Finance

16 cards

Banks of Germany

43 cards

Finance ministries

62 cards

Create Flashcards