Annuity to Charitable trust
client inherited 3 annuities with a total of 260k. Cost basis is 57k with a total taxable amount of $203k.
We looked into the 5yr deferral and the Lincoln i4life product. Client is a doctor age 65 looking to retire at 70 and does want any income now.
a.If we transfer the annuities over to a charitable lead trust so he gets no income and children receive the balance when he passes tax free, does he still pay taxes on the gain from the annuity?
or…
b. is that no allowed?
Any other suggestions that would help him on the tax burden?
Thank you,
Douglas
Permalink Submitted by Bruce Steiner on Thu, 2018-03-01 19:13
There is often no good solution to an investment-type annuity. The insurance company may allow the deferral if the charitable lead annuity trust is a grantor trust for income tax purposes, but it may not be worth the complexity for a modest amount. If he disclaims the annuities, will they go to his children as the contingent beneficiaries? If not, he could simply collect them, pay the tax, and keep what’s left after taxes.