Own an Annuity? Beware of this potential "gotcha"!

Do you or someone you know own an annuity?

If so, it’s essential to understand how some of the fine print that may be in your contract may cost your estate in the future.

It may be very costly in fact.

Said another way…

If you were anticipating a payout down the road from your annuity, which would you envision?

Payout Option A: $x
Payout Option B: $x – $19,000?

You may think you’re going to get Option A based on what you were told or what you were sold.

Sadly, the grim reality may be that you get Option B instead…


I’ve recently become the trustee for my Dad’s trust after he passed away in August.

Being a complete newbie when it comes to what a trustee does, I’ve learned many things during that time.

One of the main lessons so far? Ask a lot of questions and understand how payouts are calculated on annuity and investment products.

Back in 2009, my Dad had seen enough of the losses in the stock market and wanted to build some income protection into his assets through the purchase of annuities. Made complete sense to me at the time.

I wasn’t involved in the conversations back then, so I’m not sure exactly what was said (or unsaid) during the sales process.

What I do know is that he ended up with single premium 20-year certain fixed annuities from two separate insurance companies.


One of the two companies he chose for an annuity purchase was Northwestern Mutual Life.

On the typical customer satisfaction scale of 0 (worst) to 10 (best), Northwestern gets a 12.

The entire process, from the filing of the initial claim to the payout to the trust was very simple and they communicated very well at every step of the way.

MOST IMPORTANTLY – they paid off the balance of the account as one would expect (at least how I would have expected it) using the simple calculation of:
# of months left on the annuity * monthly payment amount = final payout amount + interest earned on the account since the date of death.

They certainly made my life as a trustee very simple