Having a Trust as the beneficiary on a non-qualified annuity
What are the pros and cons of having a Trust as the beneficiary of a non-qualified annuity? Thus far, the annuitant does not have any preferences of distributing the funds upon her death. The Trust is currently set to be divided amongst her 4 children.
Permalink Submitted by Alan - IRA critic on Thu, 2013-02-21 00:44
A trust beneficiary usually results in either a 5 year payout or a lump sum payout if the contract requires it. The IRS has not extended the concept of “Qualified trusts” as IRA beneficiaries to NQ annuities. The insuror should be asked what options are available for the trust beneficiaries. And if the trustee is allowed to accumulate distributions in the trust, the trust tax rates are much higher than typical individual tax rates.
Permalink Submitted by Bruce Steiner on Thu, 2013-02-21 03:18
If the trust pays to the four children outright, there’s no purpose to running the annuity through the trust.