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Nonqualified Annuities

A nonqualified annuity is purchased outside of an employer-provided retirement plan. After-tax dollars are used to fund a nonqualified annuity, so contributions are not deductible from gross income for income tax purposes. Taxes on interest or earnings in a nonqualified annuity are deferred until withdrawal. In a lump-sum distribution of a nonqualified annuity, the monies may be transferred into an IRA or similar vehicle to defer taxes additionally. Only a portion of a monthly annuity payment is taxed because each payment is partially principal that has been taxed and partially interest earned. The portion of the monthly payment that is excluded from taxes is determined by an exclusion ratio. The exclusion ratio is the total amount of premiums paid divided by the total expected payment amounts. If the expected return is based on a life expectancy or joint life expectancy, the Internal Revenue Service has tables and multipliers that are used to determine the total expected return. If the expected return is not based on a life expectancy, the total expected return is the sum of all amounts to be received.

Annuity Contract Considerations

The formation and validity of an annuity policy or contract is determined in the same way as a standard contract. The annuity policy must be supported by consideration (unless it is a charitable gift annuity or the annuity involves a bequest). The parties to the annuity contract must have legal capacity to contract.

Income Eligibility for Medicaid

Medicaid programs offer assistance to needy persons who cannot afford to pay for their medical care. The federal and individual state governments jointly administer Medicaid. While federal statutes and regulations provide the template, each state establishes its own methodology for administering its Medicaid program.

Medicare - Private Fee-for-Service Plans - Coverage and Cost

Some Medicare enrollees choose to receive their services through private fee-for-service plans offered by private insurance companies. Although these plans differ from the Original Medicare Plan, enrollees are still part of the Medicare system. This article discusses how private fee-for-service plans work, what costs are involved for enrollees, and what services are covered.

Prepaid Legal Service Plans

More and more, prepaid legal service plans are offered to help consumers access legal services at a reduced cost. These plans are often described as a form of insurance because a monthly premium is typically paid in exchange for the right to receive some forms of legal services free and others at a reduced fee.