Using Balloon-Style Immediate Annuities in VA Planning

Aug. 31, 2011 - PRLog -- Balloon-style immediate annuities are becoming more and more popular in VA planning.  The purpose in using a balloon-style immediate annuity in lieu of a level-pay immediate annuity is to convert excess net worth into a very minimal monthly cash flow.  Whether the excess net worth consists of cash, checking and savings accounts, stocks, bonds, mutual funds, cash value life insurance, or an IRA, it can be converted into a balloon-style immediate annuity.

A balloon-style immediate annuity is funded with a single premium of no less than $5,000.  It makes very small monthly payments that are equal in amount with the exception of the last monthly payment, which is very large - the balloon payment.  It can be structured with a period certain of no less than 12 months.  Furthermore, after the last monthly payment is made, the contract automatically terminates.

Features of Balloon-Style Immediate Annuities used by Krause Financial Services:

   If prior to receiving the balloon payment, the owner decides it is not in his or her best interest to receive the payment as it may jeopardize benefits the owner can elect to continue/rollover the final payment as a means of maintaining program eligibility.  As a result of taking such action, the owner will not receive the scheduled balloon-payment, but will receive additional small balloon-style payments.
   At any time during the period certain the owner can elect to convert the balloon-style immediate annuity into a level-pay immediate annuity; this is a one-time election.  The primary reason for doing so is that the owner needs to increase his or her monthly cash flow.  The secondary reason for doing so is that the owner is transitioning from VA benefits to Medicaid benefits - a Medicaid Compliant Annuity requires equal payments.
   Following the death of the owner of a balloon-style immediate annuity contract, some insurance companies offer the beneficiary a cash commutation value, instead of continuing the monthly payments.  If the beneficiary elects the cash commutation a discount does apply.

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Krause Financial Services specializes in helping families qualify for Medicaid benefits through the use of Medicaid Compliant Annuities, and Veterans Aid & Attendance benefits through the use of various life and annuity insurance products.