The beneficiaries must be living people, not entities, for this trust to be considered outside of your estate. The money in an irrevocable trust will pass tax-free to the beneficiaries upon your death. An annuity is one way to save for retirement that offers some tax advantages that differ from commonly used retirement accounts, such as an IRA or an employer-sponsored 401(k). However, once the beneficiary passes away, the rules of the annuity change. A common type of grantor trust is a living trust used for estate planning purposes. Logos for Yahoo, MSN, MarketWatch, Nasdaq, Forbes, Investors.com, and Morningstar, The Transfer of Ownership of a Non-Qualified Annuity, Genworth: Ownership Change and Beneficiary Designation Instructions and Guidelines. Annuities are beneficial in that they can accomplish specific goals for clients. Distribution of assets takes place according to the instructions in the trust. Irrevocable trusts can have many applications in planning for the preservation and distribution of an estate, including: To take advantage of the estate tax exemption and remove taxable. Your tax burden is going to change whether you purchased a qualified versus a non-qualified annuity. If you haven't already placed assets in a 529 plan, Uniform Gifts to Minors Act (UGMA) account or Uniform Transfers to Minors Act (UTMA) account, doing so during your lifetime may be a strategic way to reduce the value of your taxable estate while working toward education savings goals. The amount of the annuity must be a fixed amount. There are numerous reasons why you would put an annuity in a trust. So you cant, for example, sell your entire annuity to a relative for $1 to get around transfer rules. Moreover, it is a great way to protect your principal, as the funds will be used for a more meaningful purpose. A grantor trust for income tax purposes could be either. That can raise some serious tax issues. Kiplinger is part of Future plc, an international media group and leading digital publisher. He currently advises families on their insurance and financial planning needs. When an annuity is owned by a trust, the holder of the annuity is deemed by Section 72 (s) (6) (A) to be the primary annuitant. Plus, these trusts usually require an independent individual located in the administering state to manage trust assets. Are There Any Advantages to Placing Annuities Into a Living Trust
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