Investment Needs
Legacy Planning
Legacy Planning
Our legacy planning solutions address three primary risks or exposures for investors: 1.) principal risk, 2.) taxes, and 3.) mismanagement by heirs.
Onboard features like the Restricted Stretch provision, and optional Return of Premium (ROP) rider available in our retirement investments give your clients the flexibility, transparency and control they need to plan for the transfer of their wealth, without the cost and complexity of traditional legacy planning instruments.
Variable annuities are long-term, tax-deferred investments investors buy from an insurance company to help them save for retirement. They are called “variable” because their value fluctuates based on the performance of the underlying investment options chosen. Some variable annuities offer optional living and death benefits for an additional fee. There are some limitations that may not be right for all investors, including that withdrawals are subject to income tax and those taken before age 59½ may be subject to a 10% early withdrawal federal tax penalty. Keep in mind that all guarantees and protections are subject to the claims paying ability of Nationwide Life Insurance Company. We also need to add that all guarantees and protections are subject to the claims paying ability of Nationwide Life Insurance Company.
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Run a stretch illustration
Learn how stretching to the next generation impacts your client's investment
For a client whose goals include providing a legacy for their children and grandchildren, protecting their hard-earned investment from loss of principal may be a top priority.
The optional Return of Premium feature available in our simplified, low-cost Investment Only Variable Annuity guarantees that your client will never lose their initial investment, no matter how the market behaves. It's like an insurance policy for their legacy–delivering peace of mind that their loved-ones are provided for financially.
Meet Joan
Retired
Joan, Retired
Joan (60) is a doting grandmother who lives close to her only daughter, Rena, and Rena's two young daughters. A widow, she retired from the Red Cross recently, and lives comfortably on the investments made by her late husband, Richard. As an Executive at a Fortune 500 company, Richard was shrewd with their money, and left her a sizable IRA which her financial advisor suggested she transfer to her own IRA after his death in 2007.
The Great Recession that followed hit her investments hard, and made her nervous that she might not be able to provide the kind of legacy she planned. Because she did not rely on the IRA to fund her retirement, her advisor counseled her to transfer the IRA and shelter it in the low-cost Monument Advisor Variable Annuity with an enhanced Return Of Premium (ROP) death benefit. This ROP feature guaranteed that her heirs would receive at least the premiums deposited into the contract (minus any adjusted partial withdrawals).
The transfer to an IRA wrapped in the low-cost Monument Advisor variable annuity made her feel secure knowing the money was protected. Paying only 15bps for the return of premium rider made sense given that she also insured her home, car, and life. And it gave her tremendous peace of mind that her daughter and grandchildren would be provided for in her passing.
When estates are settled, the heirs who inherit the wealth face tough decisions about how to transfer the assets.
Lump sum, 5-year payout, annuitization...Each of these payout options comes with its own set of problems, from tax exposure to mismanagement by heirs, and lack of control. The Restricted Stretch provision, available with our low-cost IOVA, allows owners to control distributions to heirs and minimize the tax burden of a large inheritance by spreading the tax burden out over their beneficiaries' lifetimes, without complex structures and expense. Owners have many options for controlling how the money is distributed, and to whom, which may help provide for heirs over very long investment horizons—when the compounding power of tax deferral becomes very valuable.
Meet Tom
Commercial Real Estate Broker
TOM, Commercial Real Estate
Broker
Tom recently sold a few of his personal real estate investments and would like to leave some of his wealth to his grandson, Lucas. At 50, he's managed to save enough for retirement, and wants to ensure that he is able to control the payouts so Lucas will enjoy a steady stream of income when he passes on. After consulting with his advisor, Tom invests $240,000 in Monument Advisor and selects the Restricted Stretch option for Lucas, his primary beneficiary. By selecting this option, Tom has peace of mind knowing that his grandson will receive his inheritance in a consistent stream of annual payments, for the rest of his life.
If Tom passes away by age 85 (his life expectancy), the compounding power of low-cost tax deferral could grow his Monument Advisor account to $1.3 million, which will be passed on to Lucas. Lucas would receive only the required minimum distributions, and the contract would continue to enjoy compounded growth for a number of years. Because of this, Lucas could receive a total of up to $2.9 million in net distributions over 39 years. That's an average of $76,000 in after-tax annual income from this one investment.
Distributions from trusts over $12,500 are taxed at the highest rate, which can negatively impact a trust investment.
This unnecessarily negative impact can be mitigated by locating that trust structure in a low-cost Investment Only Variable Annuity like Monument Advisor. A VA structure allows those distributions to be re-invested where they may compound and grow, without the tax-drag that may hinder NIMCRUTs, charitable remainder trusts, and other trust structures.
Meet Don
Oil Executive
DON, Oil Executive
65-year-old Oilman Don is soon to retire, and has accumulated enough wealth to completely enjoy his next chapter. Like many Baby Boomers, he will be part of an enormous wealth transfer estimated at more than $30 trillionthat will be passed from his generation to their children in the next 30 years. (Source: Accenture.) An estimated $12 trillion has already changed hands, as Boomers inherited wealth from their parents.
Working with his advisor, Don found an ideal legacy-planning tool in Monument Advisor. He uses it to mitigate taxes on the trusts he set up for his wife and each of his heirs.
Taxes on trusts can be high 39.6% on trust income in excess of just $12,500. But with the smart, flexible Monument Advisor IOVA, Don's trusts can benefit from a diversified portfolio and compound what he saves on taxes. It also enables him to control when his trusts generate taxable income, thereby accumulating and compounding more savings for future generations. So when the time comes to transfer his wealth, he'll make the most of it.
Ensuring the smooth transfer of wealth to charities of choice is an important legacy planning component.
Locating assets earmarked for charities in a low-cost Investment Only Variable Annuity may enable those assets to accumulate and grow tax-free, until distribution, so that your clients can maximize the impact of their charitable giving. And if tax-exempt charities are named as beneficiaries in the VA contract, those assets are transferred tax-free, as the owners wish, without the hassle of probate and legal processes.
Meet Patricia and Harry
Wealthy Benefactors
PATRICIA AND HARRY, Wealthy Benefactors
Patricia (72) and Harry (70) met while he was working on the loading dock at the American Red Cross blood bank in Chicago. She was Director of Nurses, and he was volunteering during his postgraduate studies at the Kellogg School of Management at Northwestern. Patricia made every excuse to 'bump' into Harry every time a shipment reached the facility, and over time, they dated, got married and settled into a beautiful home on the shores of Lake Michigan.
Harry worked for many years in his father's successful meatpacking business, and ultimately took over when his Dad retired in the mid '70s. Harry and Patricia made it a priority to support the arts and culture. They wanted to give back to the community to which they owed so much of their success. When Harry retired, he and Patricia began to devote more time to service on non-profit boards, raising money, and contributing their own wealth.
Blessed with a large estate, and in no need of additional income, the couple planned to maximize the charitable portion of their legacy by selling some valuable commercial properties. They needed to plan for the transfer of that wealth to their favored charities. Their financial advisor offered a few suggestions including a charitable remainder trust and the low-cost Investment Only Variable Annuity Monument Advisor.
The wealthy couple opted to sell the properties and take the initial tax hit, then invest the proceeds in the Monument Advisor VA. They would simply name the American Red Cross and Steppenwolf theatre companies as 50/50 beneficiaries; the money would grow tax free, and then distribute to the organizations tax-free when they pass away. No complex trusts, trustees, or attorneys would be requiredthis portion of their charitable giving would benefit from a simple, IOVA structure that would maximize the compounding power of tax deferral.
Spouses shouldn’t let the market dictate the financial well-being of the other.
Included as part of the Return of Premium Death Benefit1 on Nationwide Advisory Retirement Income Annuity, the Spousal Protection Death Benefit feature helps spouses provide for each other regardless of who passes away first, even if only one spouse owns the annuity. In the event that the market is down when a spouse passes away, the surviving spouse has options to protect their financial well-being, providing them with income for when they need it most.
1Additional fees may apply, please see the prospectus for details. The Return of Premium Rider is not available in New York.
Meet Roy and Cheryl
Roy (57) and Cheryl (55) met 30 years ago—he was moving to a new city to pursue a career in finance, and she was the young real estate agent who helped him find his house. Together, they turned his house into a home, raised three children, and now look forward to spending their golden years together when they retire.
Cheryl and Roy have been prudent savers and understand that circumstances can change unexpectedly. When Roy was young, his father passed away, leaving his mother in a precarious financial situation. Wanting to ensure that Cheryl is in a comfortable position if something were to happen to him, their advisor recommended they look into Nationwide Advisory Retirement Income AnnuitySM (NARIASM) with the Spousal Protection Feature (as part of the Return of Premium Death Benefit).
Investing in NARIA allows Cheryl and Roy to participate in the market while simultaneously providing a Death Benefit for the surviving spouse, regardless of who passes away first. In the event that the market is down, Cheryl or Roy can decide to continue the contract, adjusted up to the death benefit amount or take the benefit in a lump-sum payout. Knowing that the other is taken care of, Cheryl and Roy are free to focus on planning their first retirement vacation.