What is one sure-fire way to mess up a financial plan? Divorce! While other financial assets are being chopped up lickety-split, it’s not so fast with DIAs and SPIAs. These irrevocable and guaranteed products are “permanent” and their owners, depending on the contract, enjoy plenty of protections attributable to these contracts’ very simple and unassuming designs.
Since billions of dollars in DIAs (thousands of contracts) are being sold annually, let’s look at an IRA DIA where spouses are also joint annuitants. While this is a common contract arrangement while individuals are married, what if divorce occurs? And, to make this example more dramatic actuarially let’s take the classic older man (age 55) younger woman (age 35) case with a Joint 100 percent survivor and life-only contract purchased with marital funds. It’s his IRA and the monthly income is $1,000 starting at his age 65.