When to withdraw from an annuity
Q: I will be retiring on Jan. 2, 2004, when I'll be 62-1/2 years old. Through work, I put money into a tax-deferred annuity. I have to start taking out money by the time I'm 75. Should I take out so much a month for life, so much a month for a given period, or take it out in one lump sum?
B.B., via e-mail
A: The best choice depends on income requirements of you and potential survivors, says Brian Breuel, a Princeton, N.J., financial planner and author of "The Complete Idiot's Guide to Buying Insurance and Annuities."
One alternative is to leave the money with the insurer and take periodic distributions as needed and pay taxes. If your annuity contract requires complete withdrawal at 75, you'll be taxed on the remaining balance then.
A better alternative may be to annuitize the contract. This converts your tax-deferred annuity into an immediate annuity and allows you to select an income plan that meets your needs.
If you're primarily concerned with maximum income today, without regard to survivors, a life-only option will pay an income for life and cease at your death.
If you have survivors that you wish to benefit, a period certain - say 10 years - would pay you less monthly income but for at least 10 years in the event of your premature death.
Q: What expenses can I expect to pay to set up a family trust?
A.S., Cumberland, R.I.
A: There are many types of "family trusts," and of greatly varying degrees of complexity, so the cost can run anywhere from $800 or so to tens of thousands.
Kenneth Burns, an attorney in Cleveland, says he recently drafted a trust for a client who wanted to leave his money to his minor child, but did not want control of that money to be given to the man's ex-wife. That was a fairly simple affair.
Vastly more complicated is the so-called A-B trust, which Mr. Burns says people sometimes use to try to minimize estate-tax burdens.
Creating one of these trusts requires a lot of legal paperwork to make sure there is an estate plan and proper way to transfer funds into the trust.
This process should involve lawyers, estate experts, and accountants. Since these people all charge by the hour, you can guess that you'll have to write a few checks before you have a workable trust.