What should I be ready for when managing my mother's annuities as she gets older?

Ten years ago when my mother was 73 years old, she was convinced by an insurance annuity broker to empty her $300,000 worth of CDs into four annuities. According to the broker, her annual interest rate would be fixed at 3%. My mother lives off of her social security and the distributions from these accounts (~$300/month). This arrangement appears to be working for her. She only takes money out of these annuities when she needs to have work done on her house. The total value of all of her accounts tend to hover right at their initial value of $300,000. I am my mother's Power of Attorney, and recently wrote her broker to ask what fees were taken annually from my mother's accounts. His answer was that there were no fees. This concerned me. They have all reached their surrender dates, but my mother doesn't want to do anything different with her money. Should I be concerned about her broker stating that there were no fees? As my mother gets older, are there any other issues that might turn up with regard to these annuities? What should I be ready for?

Personal Finance, Annuities, End of Life
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Thank you for this question and I must say it is a complicated one.  I will certainly answer as best I can based upon the information above, but I would highly suggest consulting with a fiduciary advisor (not a commissioned sales person) and review mom's situation.

You should get yourself a copy of the annuity contract and much of the information you need should be there.  It is highly possible that the annuity contract (which I am assuming is a fixed annuity from your notes) would have a minimum crediting rate of 3%.

Typically there would not be fees associated with these contracts, outside of potential surrender charges during the first ten years or so (these vary from contract to contract).  The idea here is that the insurance company uses moms deposit and invests it.  Their goal is to achieve a higher rate of return than they are paying her and that is their "fee" or return.  This is also why they impose surrender charges.  Should the investor remove the monies early on it will prohibit the insurance companies ability to outperform the rate they are paying the contract holder.

I do not think you necessarily need to be concerned with the fact that he said no fees, but I would check the contract and confirm.

In regards to your concerns going forward, I would confirm that the beneficiaries listed currently are in line with mom's wishes.  These can change over time and get over looked very often.  Also be aware that any monies withdrawn from the contract during her lifetime, to the extent it exceeds her investment, will be taxed as ordinary income.  Upon her demise the beneficiary will be able to remove the funds up to a maximum of five years in most cases.

I would highly suggest you get a copy of the contract, review with a fiduciary and consult with your tax professional.  Good luck!

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