Do you have any clients who own an annuity where a trust is a beneficiary of the annuity? Take a look at a recent success story!
Situation: Mom bought an annuity with her revocable living trust as a beneficiary. The 200K deposit was designed for tax deferral and all death benefit proceeds were to be sent to the beneficiaries through the trust. Mom owned the annuity.
Challenge: The account grew to 450k, which is usually not a bad thing. However, trusts have limited death benefit options when inheriting a non-qualified annuity (Lump Sum or 5-year deferral), and the trust would have had to pay income tax on the first 250K in gains before accessing the principal.
Implementation: Client completed a 1035 exchange to Lincoln variable annuity using the patented i4LIFE® living benefit rider with the intent of turning on income prior to the annuitant’s death.
- Income provided to Mom receives an Exclusion Ratio (part principal/part gain)
- Taxes stay deferred on remaining account value up to age 115 of annuitant
- FIFO (principal first) paid to beneficiary upon death of annuitant, Gains can be stretched until Mom’s age 115 if structured correctly.
For more information on this topic, please give me a call. (303) 797-9080 Ext. 113
Contact Micah Hesting for more information:
Advisor Relationships/Business Development Strategist