It is in your very best interest to understand and learn about US Treasury Bonds.  They are terrific tools as sales assistance in selling annuities.

Why?

Because there is no risk with US Treasury Bonds. They are the safest and most secure place in the world to keep funds on deposit.

What are annuities?  Aren’t they safe and secure also?  Are they as secure as US Treasury Bonds?  Nothing on earth is as safe as US Treasury Bonds so if that is the case, how does that help annuities?

Like this.  Both are very safe but there is a difference and it has to do with evaluation.  How much can you sell your US Treasury Bond for prior to maturity?  A little background:

Treasuries fall into three basic categories:

·        Bills: up to 26 weeks to maturity

·        Notes: 2, 5 and 10 years

·        Bonds: 30 years

Bonds are now sold in only 30 year terms with interest paid every six months.  At the end of the term your bond matures and your funds are returned to you. 

The question to ask is this:

What happens if your life is interrupted do to death? Illness?  Need for funds?  If you must sell your bond prior to maturity it would not be worth what you paid for it!  It will be worth either more or less depending on general interest rates on the open market.

The only time you will be guaranteed the return of your funds is at maturity.  30 years is a long period of time and well beyond the time horizon of many of our target market.

What is the time horizon on our products?  Less.  And our products are always fully guaranteed to return the full deposit in a shorter time period.

Ask yourself; do you think you will need these funds within the next 30 years? 

If that isn’t enough then add this:

If you die, your beneficiaries will have to continue your original 30 year time commitment with US Treasury Bonds. This of course is not true with annuities.  At death the full account values are available 100% for your beneficiary.

If that isn’t enough then add this:

How about the need of entering a nursing home?  Do US Treasury Bonds allow you access to your funds in the event of needing a nursing home?  No!  Do annuities? Yes.

If that isn’t enough then add this:

Are US Treasury Bonds exempt from Medicaid spend down?  No! How about annuities? Yes! (they can be based on certain conditions and state regulations.)

Use US Treasury Bonds to help explain the benefits of annuities, makes an easy move to them. 

What is an Annuity?

 

Annuities have been in existence for well over two hundred years. The very first mention of Annuities in the United States was the use of these products by the Presbyterian Church in 1740 to provide security for the clergy and widows. Annuities allow you to accumulate tax-deferred funds for retirement and then, if you desire, receive a guaranteed income (this process is called Annuitization) payable for life or for a specified period of time: generally a term of five or ten years.

Annuities are offered by Insurance companies and sold through licensed agents. The insurance company must be evaluated and licensed in your state as does the agent. State insurance commissions scrutinize Insurance companies to ensure they have reserve funds, commonly referred to as State Legal Reserve Pools, in place to protect investors before granting insurance companies licenses. If an insurance company goes out of business other insurance companies licensed in state must assume bankrupt insurers obligations and liabilities. Note that this protection protects fixed-rate annuity holders only, with some protection afforded to variable annuity owners.

Annuities are very similar to CDs offered by banks. Just like banks insurance companies offer different rates and returns on annuity investments.

Advantages of Annuities:

All annuities have three primary advantages: Tax Deferral, Avoidance of Probate, and a Guaranteed Income (optional) for a fixed period of time, or income for life.

More specific reasons to invest in fixed and immediate annuities:

• You need to safely create wealth for your heirs
• You need tax-deferred growth
• You need your principal and interest guaranteed
• You need your heirs to avoid probate upon your death
• You need an increased death benefit
• You need stock-market linked gains without the downside risk
• You have money that is designated for inheritance
• You do not need more than 10% liquidity annually

Charitable Gift Annuities and How They Could Benefit You.

What is a Charitable Gift Annuity?

A charitable gift annuity is a vehicle used to provide financial gifts to charities and to benefit with income. The gift annuity is a contract under which a charity receives a gift of cash and agrees to pay a fixed sum of money for a period of time. The person donating the money is referred to as the donor and the person receiving the income becomes the annuitant.  The same person can be both donor and annuitant but there are no specific rules as to which is the donor and which is the annuitant. It is possible to name two annuitants from one gift. 

The income received by the annuitant is a fixed amount for a specific time period and is set from the beginning. They will neither increase nor decrease regardless of changes in market conditions or general interest rates. The charity guarantees to make the payments and assumes financial risk for the investment.

The size of the income benefits depend on several factors:

- The gift annuity rate offered by the charity which can vary from charity to charity.
- The financial value of the contribution.
- The number of annuitants and their ages.
- The length of time the benefit payments will last.

Generally, charities will offer a lower rate of income calculation than commercial insurance companies so that a significant portion of a contribution will be available to the charity. Even though the rates may be lower than commercial rates, gift annuities are still very attractive to individuals who want to support a favorite charity and provide income benefits to them.

Most gift annuity donors are retired and who want to increase income backed by guarantees with a possibility of tax savings. Some of the decisions to select a charitable gift annuity could be because of the following reasons.

- Appreciated stock or mutual fund shares which would cause a capital gains tax liability if sold.
- The idea of fixed income payments without risk and stock market volatility.
- Income payments that could include a spouse or other family member as a beneficiary benefit.
- Interest rates at banks could be in decline and the income tax liability for earned interest could be a negative.

Taxes are a consideration in selecting a charitable gift annuity. The category of gift is important because if the gift is in cash, part of the income benefit will be taxed and some will be at free.  The factors determining this ratio are based on age and the amount of the income benefit. If the donation is an appreciated asset such as real estate, the payment could be part ordinary income and part long term capital gains.  The charity will provide the tax information prior to the gift based. It is always wise to obtain tax advice from your tax preparer before entering into any final agreement.

Many taxpayers can also benefit from the deduction of the gift to the charity. If a taxpayer itemizes deductions then a charitable deduction for a portion of the gift may be utilized. This deduction is based on the amount of income benefits agreed upon with the charity. This deduction can result in significant income tax savings and is based on each individual donor and his/her tax situation.

A charitable gift annuity can provide to both a donor and a charity several important financial planning advantages. Donors can increase their income while obtaining significant tax reductions. Charities can tap into sources of funds, which would not become available until the death of the donors.