What is annuity arbitrage?

Annuity arbitrage is a sophisticated financial planning technique that can be used to transfer wealth out of an estate tax-free and create income for life for a surviving spouse or other beneficiary. Term is the least expensive form of life insurance. Premiums paid go toward the pure cost of insurance.

Can you fund life insurance with an annuity?

Annuity funds are used to purchase life insurance. WHO CAN BENEFIT? You may have used annuities as a savings vehicle as part of your financial plan. The beneficiaries of the policy would then be paid a generally tax-free death benefit and avoid the taxes associated with inheriting annuity funds.

How is an annuity similar to life insurance?

Life insurance and annuities both allow individuals to invest on a tax-deferred basis. Life insurance pays an individual’s loved ones after they die. Annuities take payments upfront then dole out a lifelong income stream to policyholders until they die.

Are annuities the opposite of life insurance?

Annuities are not life insurance policies. They are, in fact, designed to serve the exact opposite purpose. Whereas life insurance guarantees income in the event of your death, an annuity guarantees income in the event that you live longer than you expect to.

Can you leverage an annuity?

In the annuity world, it’s possible to leverage an annuity and a life insurance policy for maximum benefit. It is commonly referred to as “annuity arbitrage”. Many investors have heard the word arbitrage used in the securities world to explain the simultaneous buying and selling of stocks or other investments.

What is the best reason to buy life insurance rather than annuities?

The annuity offers tax-deferred savings and retirement income. Simply put—life insurance protects your loved ones if you die prematurely while the annuity protects your income if you live longer than expected.

Do you pay taxes on life insurance annuity?

Annuities are tax deferred. What this means is taxes are not due until you receive income payments from your annuity. Withdrawals and lump sum distributions from an annuity are taxed as ordinary income. They do not receive the benefit of being taxed as capital gains.

What is the best reason to purchase life insurance rather than annuities?

What is leverage annuity?