Trust as beneficiary of non qualified annuity and see through trust
Can trustee pay beneficiaries of trust and keep all annuity assets tax deferred in 2 new non qualified for beneficiaries ?
Can trustee pay beneficiaries of trust and keep all annuity assets tax deferred in 2 new non qualified for beneficiaries ?
Permalink Submitted by Alan - IRA critic on Tue, 2025-09-16 23:15
The see through trust beneficiary rules that apply to qualified plans and IRAs do not apply to NQ annuities, therefore the insurance company can not “see through” the trust to the trust beneficiaries. The 5 year rule will apply with respect to distributions to the trust.
Whether the insurance company will allow the trustee of the trust to assign the death benefit out of the trust to the trust beneficiaries is up to the company.
Permalink Submitted by Monte Hinkle on Wed, 2025-09-17 17:31
Tks for the quick response…..so once the insurance company pays the lump sum to the trust….. the trustee can turn around and send checks to new non qualified annuity for the 2 beneficiaries of the trust…. keeping the previous cost basis and deferral in the new contracts…..again look thru trust… brother \ daughter beneficiaries…..with funds being paid out in 5 years from date of death… tks
Permalink Submitted by Alan - IRA critic on Wed, 2025-09-17 19:37
Not exactly.
The annuity will have to be distributed to the trust within 5 years, and these distributions will be taxable to the trust to the extent of gains generated in the annuity.
The trust provisions will determine what the trustee can do with these distributions. They might allow the trustee to pass the income through to the trust beneficiaries on a K 1 which will pass the taxable trust income to the beneficiaries with taxes due at their lower marginal rate instead of the higher trust rates. The beneficiaries will not inherit the annuity unless a 1035 exchange can be worked out with the insurance company, and this is probably unlikely.