Manulife USA is stretching its annuities' muscles to put more earning power into its plans over a period of time that could last generations.

A stretch annuity lengthens the amount of time an annuity can continue to pay benefits. Instead of paying out at a certain length of time after the owner's death, the stretching concept allows the annuity to be passed from generation to generation. It can be variable or fixed.

A nonspousal survivor will no longer have to cash in an annuity within five years of the plan owner's death.

"For those investors who have amassed enough assets for retirement and wish to pass their estate on to beneficiaries, stretch annuities may offer investors everything they could want in an estate planning tool — a flexible strategy that helps provide control over the assets, a potentially lessened tax impact for beneficiaries, and finally, the assurance that their legacies will continue to help provide income for generations," says Robert T. Cassato, president of Manulife Wood Logan, the marketing and distribution arm of Manulife's USA Venture Annuity Products.

Pat Haywood, vice president — director of qualified plans, says the plan will save survivors much. "Historically, 96 percent take a lump sum, which creates a large tax liability."

A nonspousal survivor will no longer have to cash in an annuity within five years of the plan owner's death. A popular tool for owners of Individual Retirement Accounts, the concept has been approved for annuities in 2002 by the Internal Revenue Service, Haywood says.

Features of the stretch annuity include:

• Potentially increasing account value by stretching tax deferral benefits over a longer period of time, even as withdrawals are taken out.
• Spreading the potential tax liability to the beneficiaries over their life expectancies.
• Creating greater flexibility in designing income options through systematic withdrawals.
• Enabling the original contract holder to direct the investment and withdrawal of assets through generations