Insurance company acting as Trustee

[scagnt83]

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.

Do those qualifications include an insurance license or securities license?

You didnt answer the question. Is he aware about the 10% age based penalty if annuitant is under 59 1/2? Is he a licensed advisor?

.

 

[DHK]

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

I'm not a registered rep and haven't been for 14 years.

 

[DHK]

Do those qualifications include an insurance license or securities license?

You didnt answer the question. Is he aware about the 10% age based penalty if annuitant is under 59 1/2? Is he a licensed advisor?

.

I can't disclose more than I already have about who he is per his request ... and you and I both know that licensing is not a test of competence.

 

[Allen Trent]

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.

Correct, that is how trust income should work, but doesn't always seem to get done that way by all attorneys.

If parents are alive, kiddie tax will apply on annual income exceeding a couple thousand a year

 

[Allen Trent]

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

If done right, a trust can be a pass through of the taxable income to the trust beneficiaries. Trust takes an income deduction on its return for income paid to beneficiary & then trust beneficiaries get the income reported to them on a K1

 

[Allen Trent]

Do those qualifications include an insurance license or securities license?

You didnt answer the question. Is he aware about the 10% age based penalty if annuitant is under 59 1/2? Is he a licensed advisor?

.

I honestly believe the 10% penalty is triggered by the owner & not the annuitant, but it is possible the annuitant is looked at for trust owned annuities. I know that trusts like revocable living trusts retain right to tax deferred status if the trust is solely for the benefit of a natural person & the trust is drafted correctly to retain that status, etc.

What I don't know is how the IRS looks at a non natural person owner for that 10% early distribution penalty. Do they look deeper to the annuitant or do they look at the trust to see the age of a beneficiary of the trust, etc

 

[DHK]

The main thing about trusts and businesses owning annuities is that they are perpetual entities with no death. So theoretically, taxes can be deferred indefinitely.

That's not the purpose of how we'd be using this annuity. It's primarily for principal protection, with decent interest earning opportunity, along with limited liquidity (up to 10% a year per the contract). Yes, interest credited and withdrawn would be subject to a 10% penalty for the beneficiary. No problem. It would certainly BE a problem if it wasn't disclosed. Everything has costs, and for the principal protection to guarantee the lump sum preservation for capital distribution, I don't think anything would do it better. Sure, I wish there wasn't that 10% penalty, but oh well.

 

[Allen Trent]

The main thing about trusts and businesses owning annuities is that they are perpetual entities with no death. So theoretically, taxes can be deferred indefinitely.

I am 99% sure this isn't legally correct. Claim must be paid when either owner or annuitant dies. Changing annuitant or owner I believe is also a taxable event

Section 72(s)(6)(A) talks about some of this & Section 72(s)(6)(B ) defines primary annuitant

 

[DHK]

I didn't complete my thought. My fault. The idea was "theoretically" taxes could be deferred indefinitely... which is why the government didn't like it and why very few (if any) business entities and trusts own annuities because they changed the laws on who can have those contracts.

 

[scagnt83]

The main thing about trusts and businesses owning annuities is that they are perpetual entities with no death. So theoretically, taxes can be deferred indefinitely.

That's not the purpose of how we'd be using this annuity. It's primarily for principal protection, with decent interest earning opportunity, along with limited liquidity (up to 10% a year per the contract). Yes, interest credited and withdrawn would be subject to a 10% penalty for the beneficiary. No problem. It would certainly BE a problem if it wasn't disclosed. Everything has costs, and for the principal protection to guarantee the lump sum preservation for capital distribution, I don't think anything would do it better. Sure, I wish there wasn't that 10% penalty, but oh well.

Completely incorrect. Taxes are owed on gains every year for business owned annuities. And certain non-natural person owned annuities.