The death benefit ensures your beneficiaries receive value from your annuity if you pass away, protecting your family from losing your investment. Most annuities include a standard death benefit, with options to enhance it for additional cost.
Standard death benefit options:
- Return of Premium: Beneficiaries receive at least what you paid in (minus withdrawals)
- Account Value: Beneficiaries receive current account value (may be higher than premium)
- Greater of the two above
Enhanced death benefit options (additional cost):
- Highest Anniversary Value: Locks in highest account value on any anniversary
- Stepped-Up Value: Account value plus a guaranteed growth rate
- Return of Premium Plus Interest: Premium plus specified interest rate
How death benefits are paid:
- Lump sum payment to beneficiaries
- Stretched over beneficiary's life expectancy (for spouse)
- Five-year or ten-year distribution (for non-spouse)
- May avoid probate if beneficiary is named
Tax implications for beneficiaries:
- Spouse beneficiaries: Can continue contract or roll to own IRA
- Non-spouse beneficiaries: Must distribute within specified period
- Earnings portion is taxed as ordinary income
- Original cost basis is not taxed
For Ocala families, the death benefit provides peace of mind that your annuity investment will benefit your loved ones, regardless of market conditions or timing.
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