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What are the tax implications of transferring a

What are the tax...

What are the tax implications of transferring a non-qualified annuity to an irrevocable trust?

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Transferred a non-qualified annuity to an irrevocable trust and received an 1099-R. the cost basis was $100,000 and the total value at time of transfer was $162,993. the 1099-R states that the taxable amount is $62,993. Nothing was withdrawn from the account. Is this correct?

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Answered in 1 hour by:
3/14/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
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The only way to avoid the distribution/transfer from being taxable, you would have to perform a 1035 exchange.

If you performed a 1035 exchange, your 1099 R would be coded with a "6" Section 1035 exchange (a tax-free exchange of life insurance, annuity, or endowment contracts).

When you transfer the annuity from your name to a separate taxing entity, such as a irrevocable trust, you generally will report the gain above your annuity cost basis.

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In your specific scenario, if you did not complete the transfer using a 1035 exchange, then you would be responsible for taxes on the growth of $$62,993.

Generally, you are able to accomplish most estate planning needs with an annuity by naming a beneficiary to the account.

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Customer reply replied 4 months ago
Is the trust or the individual taxed?

First the individual will be taxed on the distribution/ transfer of assets.

Then the cost basis for the annuity owned by the irrevocable trust will be $162,993.

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,606
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Customer reply replied 4 months ago
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