In some states, such as Florida, it is desirable to pass assets outside of the Probate court. There are many tools that you can use to achieve this objective. One such tool is life insurance and annuities.
Life Insurance is the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. Life insurance ensures the risk of a loss of life and its cash value is exempt from creditor judgment.
An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals. Annuities typically allow for tax-deferred growth of earning and may include death benefits; however early withdrawal of an annuity may trigger a penalty.
There are three types of annuities; fixed, indexed and variable. In a fixed annuity, the insurance company agrees to pay a specified rate of interest during the time your annuity is growing. Indexed annuities promise returns based on changes in an index (such as a stock price index). In a variable annuity, you can choose to invest your purchase payments from among a range of different investment options – usually mutual funds. Your return will be dependent on how your investments perform.
Life insurance and annuities pass outside of probate because the cash benefits automatically pass to the beneficiary named– rather than through Will.