By Gissou Gotlieb, Field Suitability Compliance Officer
The world of financial professionals can be much like a doctor’s – you probably get a lot of different types of questions from your clients, many of which are in the general area of “financial” matters, but have nothing to do with your specific area of expertise, credentials, or licenses and registrations. We know your dermatologist won’t likely answer your cardiovascular concerns, but how do you address questions that are outside of your area?
Perhaps a client approaches you wanting to put money away for retirement, a seemingly simple request and one that you should be able to help address. You review a very thorough list of all items that are to be considered for suitability purposes and decide on a suitable product that happens to be an annuity. Have you also vetted specific details that could impact the client’s taxes in the future? Let’s consider a few specific scenarios:
- What if this client that wanted to put money away for retirement happened to be in their 30s? While the annuity itself may offer income tax deferral, making it a promising product for consideration, did you discuss the potential tax implication should the client need the money prior to age 59½, so they are not burdened by the additional 10% tax (knowing that tax laws could change at any time for better or worse)?
- What if this client liquidated other annuity holdings and brought in the proceeds for you to purchase a fixed annuity? Did you explain the tax consequences of liquidating, surrendering, or withdrawing from another annuity, especially if a 1035 exchange could have been done to ward off immediate tax consequences?
- In trying to do some spousal and legacy planning, did you carefully map out how the owner, annuitant, and beneficiary(ies) should be set up with consideration to what the specific insurance carrier and product allow? Were you aware that selecting different individuals as the owner, annuitant and beneficiary could open considerable tax burdens to the involved parties?
There are many items to consider that can impact a client’s taxes. Some may be better known and considered, and many are most likely not known by the agent or client. Just as a doctor is clear in identifying the areas where they are qualified to assist, and will refer to a specialist when needed, you should also guide your clients to seek tax advice from those qualified as tax advisors. In the name of “helping” a client and trying to be a resource, you wouldn’t want to unknowingly cost them extra in stress, legal worries, or money. During this tax season and beyond, don’t take on tax questions you are not qualified to answer.
Gissou Gotlieb | Field Suitability Compliance Officer
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x134 | Dir: 734.786.6134
Ann Arbor Annuity Exchange and its representatives do not give tax or legal advice. Please consult your tax advisor or attorney.
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