The Gray Divorce Podcast: Episode 73 Dealing with Annuities in Divorce: What You Need to Know

In Episode 73, Andrew turns his attention to a critical yet confusing financial asset in many divorces: annuities. While annuities can provide long-term income stability, they come with unique tax implications, surrender charges, and valuation challenges that require careful planning.

What is an Annuity, really? 

Andrew starts with the basics: what annuities are, how they’re structured, and why they’re often used in retirement planning. From fixed to variable annuities, he breaks down the types and features that most often come up during divorce proceedings.

Valuation Challenges 

Dividing an annuity isn’t as simple as splitting a bank account. Andrew explains how fair market value, surrender charges, and tax considerations all play a role in calculating an annuity’s true worth in a divorce settlement.

Tax Pitfalls & Hidden Costs 

Annuities often come with embedded tax liabilities—especially if they were funded with pre-tax dollars. Andrew walks through how these tax consequences can affect both parties post-divorce and why proper legal and financial advice is essential.

When to Keep vs. Trade the Annuity 

Should you keep the annuity or negotiate for a different asset? Andrew outlines scenarios where it may be better to trade the annuity for other retirement or liquid assets, depending on your financial goals and tax bracket.

Working with Financial Professionals 

Andrew emphasizes the importance of consulting with a Certified Divorce Financial Analyst® or tax expert when annuities are part of the marital estate. These professionals can help you avoid costly mistakes and structure a smarter settlement.