What is a Retained Asset Account?
When someone with life insurance dies, the insurer sets up an interest-bearing account in the beneficiary's name called a Retained Asset Account (RAA). This account is set up much like a checking account. Typically, the insurer will issue the beneficiary a checkbook.
At any time you're free to write one check for the entire balance or select a different option that lets you draw out the money as needed while it keeps earning interest.
RAA payout options
- Single payment/lump-sum payment
- Installment payout for fixed amount or period: You can choose a fixed monthly, quarterly or annual payment, either for a set period of time or until you deplete the account.
- Installment payout for lifetime: You receive fixed monthly, quarterly, or annual payments for the rest of your life.
- Interest-only payout: The insurer pays you the interest on a monthly, quarterly or annual basis. The rest of the money remains in the account, untouched. When you die, the money is passed on to your beneficiaries.
Key questions to ask
- What interest rate is paid?
- How is the interest rate determined?
- Will the money be held by a bank?
- Will the money stay with the insurer?
- Are any banking services provided?
- What services are free and what services require a fee?