Leave a Legacy
Like many people your age, you’ve spent your life working hard, paying your mortgage, raising your children, and saving for retirement. It’s time to look back with pride on all you’ve accomplished. And it’s only natural to think about the future of the loved ones you’ll leave behind.
While you look for ways to make the most out of the money you have, you’re also thinking about the best way to leave something behind for your children, grandchildren, or your favorite charity. This can be a difficult task when you consider tax consequences and the costs of probate.
Generation Legacy life insurance annuity combo, from The Baltimore Life Insurance Company, can be an ideal solution for your situation. This innovative concept combines a life insurance policy and an annuity contract to provide a perfect option for people like you…mature individuals who want to create a brighter future for those who mean the most to you.
Immediate Annuity + Life Insurance Policy = Life Insurance Annuity
How does it work?
When you purchase Generation Legacy, you are issued two separate contracts:
Payouts from the annuity are directed to pay the premiums for the life insurance policy.
- For ages 60 to 74, the annuity payouts and whole life policy premium payments are made for 10 years. At this point, the life insurance policy is paid in full, and the annuity payments cease.
- For ages 75 to 80, the payment period lasts seven years.
Typically, Generation Legacy can be purchased with transfers from either a non-qualified deferred annuity or a rollover or direct transfer from qualified funds.
Money from a certificate of deposit, money market account, or other after-tax cash funds can also be used as a premium. If you don’t need money from these existing funds for current or future daily living expenses, Generation Legacy could be an easy, tax-efficient way to pass a significantly larger gift from these proceeds to your heirs.
Here’s an example:
Barbara, age 65, a non-tobacco user, is in the 25 percent tax bracket and wants to leave her estate to her granddaughter. She has $50,000 in a non-qualified annuity ($20,000 of gain) and $200,000 in CDs and money market funds. She receives a Form 1099 each year for the taxable income from her CDs and money market funds only.
Interest is accumulating tax-deferred in Barbara’s annuity. When Barbara dies, her granddaughter will likely have to pay income tax on the portion of Barbara’s annuity that is considered gain ($20,000), depending on the payout option. This could even force Barbara’s granddaughter into a higher tax bracket in the year she receives the funds. If Barbara surrenders her annuity for a lump sum today, her tax on the $20,000 gain would be about $5,000.
Barbara decided to transfer the $50,000 from her annuity to Generation Legacy, naming her granddaughter as beneficiary, and keep the CDs and money market funds available for other uses during retirement. By doing this, she purchased $86,605 in life insurance. This significantly increased the size of Barbara’s gift to her granddaughter. Since Generation Legacy is life insurance, the benefit will pass to her granddaughter income-tax-free at Barbara’s death (under current tax law).
CURRENT ESTATE
- Nonqualified Annuity: $50,000
- CDs & Money Market Funds: $200,000
- TOTAL ESTATE AT DEATH = $250,000
CURRENT ESTATE with Generation Legacy
- Life Insurance: $86,605
- CDs & Money Market Funds: $200,000
- TOTAL ESTATE AT DEATH = $286,605
Over the next 10 years, Barbara will receive a Form 1099 as the annual payouts from Generation Legacy’s annuity are directed into a 10-pay life insurance policy. Instead of paying $5,000 in tax at once (as she would if she cashed in the annuity), she will only be required to pay tax on a portion of the gain each year for the first 10 years.
If Barbara dies before the end of the 10-year annuity period, her granddaughter will receive the income-tax-free life insurance benefit of $86,605 and unpaid payments from the immediate annuity*, rather than the smaller taxable annuity benefit. If she dies after the 10–year annuity period, her granddaughter will receive the income-tax-free benefit of $86,605 from the paid-up life insurance policy.
Accelerated Death Benefit Riders
Baltimore Life’s single premium whole life insurance policy can also provide valuable protection you need today. Adding the optional Accelerated Death Benefit Riders allows you to receive a portion of the policy’s death benefit if you are diagnosed with a catastrophic illness as defined in the riders. As explained in the policy, you can receive this living benefit if any of the following occur:
- Terminal illness
- Permanent confinement to a nursing home
- Extended home health care
- Care from a licensed or certified adult daycare center
Terminal Illness
- The owner may accelerate a percentage of the death benefit if the insured is diagnosed as terminally ill with a life expectancy of up to 12 months.
- The owner may elect to accelerate up to 75% of the policy up to $250,000 (maximum percentage may vary by state).
Qualified Nursing Facility
The qualified nursing facility and extended care rider allow the owner to accelerate up to 50% of the policy death benefit up to a maximum of $250,000 if the insured is:
- Diagnosed chronically ill and confined to a Qualified Nursing Facility for at least 90 days with the expectation the confinement is expected to be permanent, or
- Requires Extended Care. Extended Care means the insured is chronically ill, has received care continuously for at least 90 days, and requires care provided by a licensed home health care agency or a licensed or state-certified adult daycare center.
Chronically ill means that the insured:
- is unable to perform, without substantial assistance from another person, at least two out of six activities of daily living which are
- eating;
- toileting;
- transferring (i.e., moving into or out of a bed, chair, or wheelchair);
- bathing;
- dressing; and
- continence; or
- suffers from a severe organic mental illness.
Eligibility and other features
- Ages 60-80 are eligible.
- Loans and withdrawals are available under the life insurance policy. Refer to the policy for details.
Create a lasting legacy
You’ve provided love, support, and guidance to those you care about for many years. Now, please take the next step to help ensure their financial future…talk to your Baltimore Life agent about Generation Legacy.
The Application Process
- Request a quote.
- Submit an application and health questionnaire.
- Conduct a 20-minute phone interview with a medical underwriting team.
- Wait up to 48 hours for approval. Typically, the approval rate is high; the decline rate is low.
- If approved for life insurance coverage, transfer the funds.
- Each year you’ll receive a 1099 form to report the SPIA payment to the IRS.
The Baltimore Life Insurance Company
Established in 1882, The Baltimore Life Insurance Company insures individuals, families, and businesses, providing financial protection to middle-income consumers in 49 states and the District of Columbia.
Baltimore Life conducts business with openness and integrity. We strive to make a positive difference in the lives of our policyholders, associates, and the communities we serve. Above all, we are committed to a conservative, disciplined financial strategy, recognizing that “it’s the policyholders’ money.”
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