Insurance company acting as Trustee

[scagnt83]

but an annuity helps ensure that the money will be there for a given span of years. It cannot be said the same for a portfolio of securities. If it was said, I'd want it in writing... and no fiduciary securities advisor can put that in writing without approval from their compliance and jeopardizing their E&O. (What did the market do last year again? Securities are not superior.)

Actually, securities can guarantee the principal just as much as an annuity.

They can even guarantee income, regardless of which way stocks move.

Now, if all someone has access to are mutual funds and ETFs.... well, you are correct. But that is specific to an advisors licensing, not what is available on the entire securities market.

 

[scagnt83]

And considering the legal expertise I have available to me and with whom I did consult for this case, he never said anything negative about the possibility of using an annuity for the proceeds for this particular case .

His he a licensed Financial Advisor?

Is he aware of the annual 10% penalty, on top of income tax, that they face if the Annuitant or Trust Bene is under 59.5? Thats regardless if withdrawals are taken or not...

Does he know it gets an extra 10% in taxes if thats the case?

 

[Allen Trent]

It's not 10% loss on income. It's a 10% penalty on the interest earned and withdrawn (LIFO). It's small

That is not how taxes work when the owner isn't a natural person..if a business or entity or irrevocable trusts own an Annuity, they can't defer taxes on interest. They must report all interest annually even if no withdrawals are taken. It is literally taxed like bank money in that regard, but also gets the negative added 10% pre 59 1/2 penalty if it is applicable

 

[Allen Trent]

And how have bonds been doing lately in a rising interest rate environment?

Bonds are great if you hold them to maturity and don't need to touch them... but that's not in this case.

Depends on the corporate bonds, government bonds, treasuries & dividend paying stocks held in the portfolio.

 

[DHK]

Actually, securities can guarantee the principal just as much as an annuity.

Um... I can't believe you actually wrote that.

There are brokered CDs and T-Bills and stuff like that... but other than that, they can't.

And by comparison, annuities will outearn those and allow limited liquidity at the same time.

 

[DHK]

His he a licensed Financial Advisor?

Is he aware of the annual 10% penalty, on top of income tax, that they face if the Annuitant or Trust Bene is under 59.5? Thats regardless if withdrawals are taken or not...

Does he know it gets an extra 10% in taxes if thats the case?

Let's just say that he's far more than qualified than you can possibly imagine.

He's known as "The Professor" and he was once in a law practice with Nick Paleveda many years ago... whom I did a webinar with in March. Now Nick does 412(e)3 plans and is licensed to practice law in the 9th circuit court of appeals, 11th circuit court of appeals,... and the U.S. Supreme Court... and The Professor's credentials... are way above that particularly in international circles.

 

[DHK]

That is not how taxes work when the owner isn't a natural person..if a business or entity or irrevocable trusts own an Annuity, they can't defer taxes on interest. They must report all interest annually even if no withdrawals are taken. It is literally taxed like bank money in that regard, but also gets the negative added 10% pre 59 1/2 penalty if it is applicable

Income would be received on behalf of the beneficiary. They receive the income as the individual.

In the case I was working on, the income would be taxed to the 6 year old beneficiary and he'd have to file a tax return... or rather the guardian would have to on their behalf. Of course kiddie-tax rules may need to be figured out, but it's not 'earned' income from a job, but from an annuity contract.

It may be held in the trust, but the income is paid to the beneficiary and they're the ones to file a tax return.

 

[DHK]

Right now, the reason the case I was working on was put on hold was because the baby-mama still needs to establish guardianship in order to be able to process the death benefit of the life insurance policy. (Apparently she's some 28 year old aerobics instructor who never did marry the father... and I'm sure the father knew exactly why he didn't list her as a beneficiary at the time either.)

And based on the legal advice received, the longer she waits, the better it is for the minor beneficiary. Particularly since the AGENT (not me) listed the minor as the beneficiary... and could cause a future E&O claim for negligence on his part for endangering his future inheritance when "baby mama" could squander the whole thing.

So the death benefits are still with the insurance company at this time... and we're in no hurry to do anything.

The plan for the proceeds, aside from current needs and maintenance, was to fund annuities for principal protection and use the annuities to buy a life policy on him (a 20 pay or something) in order to help fund his future.

But until guardianship is established, none of that can happen.

 

[scagnt83]

Um... I can't believe you actually wrote that.

There are brokered CDs and T-Bills and stuff like that... but other than that, they can't.

And by comparison, annuities will outearn those and allow limited liquidity at the same time.

I cant believe you dont know what other securities and strategies are out there and how they work, being a Registered Rep and all.

 

[scagnt83]

Income would be received on behalf of the beneficiary. They receive the income as the individual.

In the case I was working on, the income would be taxed to the 6 year old beneficiary and he'd have to file a tax return... or rather the guardian would have to on their behalf. Of course kiddie-tax rules may need to be figured out, but it's not 'earned' income from a job, but from an annuity contract.

It may be held in the trust, but the income is paid to the beneficiary and they're the ones to file a tax return.

Allan is speaking about who the carrier will send the 1099 to.